Imagine that you passed the final interview in an IT company, or agreed to run a profitable project with a client on a freelance basis. To get started, you are offered to sign a contract. We asked the IT lawyers from Stalirov&Co how designers can avoid enslaving conditions and financial risks signing contracts. Below you will find a list of questions, the answers to which you need to find in the contract and check if they suit you.
Who am I: an individual or an entrepreneur?
Firstly, you need to find out in what status a designer can sign a contract. It can be an individual or an entrepreneur. In the first case, you can accept payment on a personal card, but in order to avoid negative consequences, you need to pay 18% income tax and 1.5% military tax. Indeed, many continue to accept payments to a personal card and do not pay taxes, but such designers are not immune from bank compliance. At any time, the bank can request documents to confirm the source of income and pay taxes. If the specialist cannot provide them, the account may be blocked. In addition, fewer businesses want to work with specialists who avoid paying taxes.
If you are confident in long-term cooperation, register as a private entrepreneur. The most common option for designers is to become a single taxpayer in the third group. Then, you need to pay a 5% single tax on monthly income and 22% on single social payment, which remains voluntary until the end of martial law. It turns out that if you have no income, you can not pay taxes, but do not forget to file declarations.
If you are registering as an entrepreneur, be sure to check that your NACE is suitable for providing designer services. You need to choose 74.10, otherwise, you can lose the status of a single taxpayer and then the tax burden will increase to 41.5%, instead of 6.5%.
What tasks will I have to perform?
The subject of the contract is one of the first items that describes your responsibilities. Check if there is something in this clause that you have not discussed with the customer so that after the start of cooperation there are no surprises. As a separate clause in the contract, it is important to prescribe the possibility of setting tasks on task managers and instant messengers. With the help of such a provision, you legalize communication and agreements on the implementation and coordination of tasks with the customer.
How is payment made?
If you work as an entrepreneur, on a monthly basis you need to submit to the customer an invoice. Most often, it is signed through electronic document management services, for example, Vchasno in Ukraine or Docusign in the USA.
The contract must contain a clause that precisely defines the period during which the customer must pay for the performed work. For example, within 7 days from the date of signing the invoice. If the customer violates the deadline, a penalty begins to accrue. Check if it is written about this in the section on the responsibility of the parties.
What intellectual property rights are transferred to the customer?
The designer transfers to the customer the right to modify, reuse, distribute, sell and license the work. The task of a specialist is to find a condition in the contract about the moment of intellectual property rights transfer. It may be the moment of creation of the design object or the moment of payment for the work. The first option is categorically not suitable, since the customer may not pay for the work, but at the same time already get the rights to the design, which means becoming its owner. The second option is a fair decision and a guarantee of payment to a specialist.
In addition, it is important to find a clause about the portfolio in the contract. Every designer wants to add new work to the portfolio, but the contract may prohibit this. Carefully study the points of the document, if nothing is written about the portfolio, ask for clarification on this issue.
How not to become a hostage of the confidentiality clause?
Most contracts include a clause that prohibits the disclosure of confidential information that a specialist receives while working with a customer. To prevent such a restriction from becoming unrealistic to fulfill, check whether the contract contains a clear list of information objects that are considered confidential. It is necessary so that the designer understands what is forbidden to be disclosed and can comply with confidentiality rules.
We recommend you figure out your legal status and payment rules from the very beginning. Pay attention to the confidentiality provisions so that the rules are not unenforceable. At the time of signing the contract, each paragraph of the document should be clear to you. It will help you avoid surprises and do your job with confidence.