From my point of view there are two misconceptions in your post.
1) you need to be set up to work-for-hire to write an invoice.
2) you need to get clearance from their employer for things outside work hours.
ad 1) No, you don't need to. At least in Germany anybody who's legally competent can write invoices. If the invoices are secondary income, you will be taxed heavily (and declare it you must), but that's it. It has been some time since I last lived and worked in the USA, but I mean to recall that it was basically the same. Of course, invoiced money is your money now and you need to donate it to the FOSS project, which then needs some kind of treasury. But you said as much already.
ad 2) No, you don't need to. Your employer is your employer, not your owner. Now I don't know about the USA today (see above) but in European countries what you do outside working hours is your private affair -- discounting a few, very specific fringe cases. If you play soccer, dabble in explosives, or code for money doesn't matter. And frankly, your typical employer in most cases does not care anyway.
This 100%. I run a German limited company (GmbH) and I can't just send money somewhere without a proper invoice. I've even had issues with paid services (think VPN providers etc) that don't send out invoices, so then I'm stuck with an expense that I can't deduct as a business expense. Make sure you can issue correct invoices, and let potential customers know upfront!
In all EU countries an invoice (tax receipt) is a legal document very exactly specified by local law as well as EU regulation, and you can't move a cent without it - you won't be able to claim the expense (subtract from tax base = pay income tax on profit only) if you don't have it.
It sounds like you're in Europe? They require invoices for everything there.
If you're in the U.S. though...you need to find a new accountant. You don't need to invoice every transaction. It certainly is advisable, for accounting/auditing purposes (much easier to track and verify income), but it's not mandated.
Wait, aren't invoices a mandatory document you have to extend (if the client asks for it) when providing products or services in the States? (just asking out of curiosity; I'm European)
Not sure where you are but in the US, you don’t need any business license for many types of businesses especially when freelancing. And you can invoice using any method including handwritten.
It is probably smarter to do something better than handwritten invoice but I am glad there are not so many hurdles to starting a business here. I have dealt with a lot of contractors here who don’t even issue a paper invoice for small jobs, they just tell me how much I owe and I just pay.
Small jobs probably are not worth suing for. But I’m sure if I don’t pay for a big enough job, they would sue me.
You should know that most US companies don't do full-fledged European style invoices. Who told you receipts are useless for company expenses though, that's simply not true.
I agree with invoicing everyone. Invoicing a client from your own business also helps distinguish you from being an employee, should that ever come into question.
Same in the UK, but for instances where you can't get a fully valid invoice, you can either "self invoice" (so the "fill in your own invoice" approach) or just whatever receipt you get as long as you feel happy defending it to a tax inspector later on.
If you use US companies for services in a European business, you are almost certainly going to have invoices every month that don't meet EU regulations at all and you just have to make it work.
Not really, if you are a consultant or external business you account for your own hours - you set a budget and then hand in a timesheet either weekly or monthly, then send an invoice at the end of each month.
I'm an American working for an Italian company as a freelancer, and I just print a generic invoice from Harvest (time tracker). I've also seen us pay other freelancers who make simple PDF invoices from web templates.
Have we been doing it completely wrong this whole time...?
ad 1) No, you don't need to. At least in Germany anybody who's legally competent can write invoices. If the invoices are secondary income, you will be taxed heavily (and declare it you must), but that's it. It has been some time since I last lived and worked in the USA, but I mean to recall that it was basically the same. Of course, invoiced money is your money now and you need to donate it to the FOSS project, which then needs some kind of treasury. But you said as much already.
ad 2) No, you don't need to. Your employer is your employer, not your owner. Now I don't know about the USA today (see above) but in European countries what you do outside working hours is your private affair -- discounting a few, very specific fringe cases. If you play soccer, dabble in explosives, or code for money doesn't matter. And frankly, your typical employer in most cases does not care anyway.
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