So I'm taking a new job and they are employing me as an independent contractor. How does this work? Do I need to create my own business? Speak to an attorney/accountant. Any help will be appreciated.
OT: paid as an independent contractor
- Thread starter KeithK7624
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You don't need to set up a company unless you want the protections that a company will provide you - like getting sued. You pay all you own taxes and withholdings - Social security etc. All you need is an accountant to help you with this. You are obviously on the hook for benefits. If you do set up a company, you might be able to take advantage of some nice savings plans.
This is more a problem for your employer than than you, but the IRS has made a point of emphasis to challenge companies, particularly IT types, that call people contractors when they are really employees. It's a way for them to save on some costs and avoid responsibility.
Is your new client (because technically you are selling them your services, not being hired) a firm that likely understands the rules as they apply to their vendors (You - the self employed provider of service)?
It is not a black/white issue, lots of gray in the question. Many court challenges have changed the definition over the years.
IRS
Independent Contractor Defined
and
Independent Contractor (Self-Employed) or Employee?
Is your new client (because technically you are selling them your services, not being hired) a firm that likely understands the rules as they apply to their vendors (You - the self employed provider of service)?
It is not a black/white issue, lots of gray in the question. Many court challenges have changed the definition over the years.
IRS
Independent Contractor Defined
and
Independent Contractor (Self-Employed) or Employee?
Look over your agreement closely. If you are working in an area of technology, consider who owns the rights to patents, copyrights and other intellectual property. Also consider the non-compete clauses.
Speaking of that patent issue.. I recently saw a commercial for .. I think it was InventHelp... the voice-over said something about "we'll patent your idea"... as if that was a good thing... instead of "We'll help YOU patent YOUR idea". And they stuck that in the middle of all the stuff about "helping YOU.." do this and that. So it sounded like..
We'll help you this..
We'll patent...
We'll help you that..
So.. yeah.. read the agreement..
The big advantage to setting up as a company is in the manner in which income is treated. The IRS requires you to pay yourself a reasonable salary, which is open to ones interpretation. The balance of income can be treated as a dividend, which is subject to a lower tax rate.
To start your own company, all he has to do is file articles of incorporation with the state. Templates are freely available on the web.
The big adjustment is paying your taxes quarterly. I would suggest a setting up a separate business account and paying your social security and other taxes from this account. instructions are freely available on the IRS's website, as to the required amounts which need to be paid. The process was surprisingly straight forward, and i paid my taxes electronically when i had my own business. the key is to be super organized and to keep the support for all the calculations you are making. I used an excel spreadsheet for this purpose.
Bank of America has really great tools for small businesses.
Just make sure that you are getting a good wage. We used to assume between 27%-28% for benefits.
Have you priced out all the costs mentioned above vs. working for someone? I would also doubt you could collect unemployment if they end your contract, even after a long period of time. Good luck. $$$$
Not saying that particular company is bad, but there is a history of those places being investigated and put out of business. I'm a patent attorney. Over 20 or so years, I have had several prospective clients relate a tale along the lines of "I spent 10's of thousands of dollars with XYZ invention company, and I did not get a patent." Where these companies purportedly help you (where patent attorney generally do not) is in the marketing of your idea. But marketing before filing a solid patent application is putting the cart before the horse. Unfortunately, getting a patent can be a very expensive and time-consuming exercise.
What kind of work are you doing?
is it customary in this field to utilize '1099' independent contractors? ( if yes, you may have others to consult on how they handle things)
Is this potentially a long term situation?
Keep expense logs - keep all receipt ... better yet go see an accountant and set it up right so that to are not pulling your hair out at tax time trying to reconstruct a history of your business expenses
Also
Where will you work?
Will you have several clients?
- if you have only one client , you work in a space / desk that they provide, work the hours that they designate (like 40 hours a week ... 49 weeks a year), doing the work that they assign, for an unspecified long term (essentially un-ending) assignment .... you are in the area that others have mentioned where you eventually can be essentially considered to be an employee in the eyes of the IRS ... this is more of an issue for your employer - but watch out - if they are clueless & unfamiliar with the rules... but suddenly become aware of the issues, they could suddenly conclude your arrangement
This post was edited on 4/6 12:47 PM by RUMBA-JK
is it customary in this field to utilize '1099' independent contractors? ( if yes, you may have others to consult on how they handle things)
Is this potentially a long term situation?
Keep expense logs - keep all receipt ... better yet go see an accountant and set it up right so that to are not pulling your hair out at tax time trying to reconstruct a history of your business expenses
Also
Where will you work?
Will you have several clients?
- if you have only one client , you work in a space / desk that they provide, work the hours that they designate (like 40 hours a week ... 49 weeks a year), doing the work that they assign, for an unspecified long term (essentially un-ending) assignment .... you are in the area that others have mentioned where you eventually can be essentially considered to be an employee in the eyes of the IRS ... this is more of an issue for your employer - but watch out - if they are clueless & unfamiliar with the rules... but suddenly become aware of the issues, they could suddenly conclude your arrangement
This post was edited on 4/6 12:47 PM by RUMBA-JK
Srru86 - how does one look into the IRS thing
My company has several "freelancers" and independent contractors that are being taken advantage of....one is shift pay instead of hourly and some workers can do 10 hours a day or over 40 for the week and not get paid time and a half...
The people that do get paid hourly and go over 40 hours have had their 6 or 7 hours overtime moved to their next pay period and the following weeks hours cut, clearly illegal....
And this is a 5 billion dollar company, just the guy running the department is a prick and we want him out
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My company has several "freelancers" and independent contractors that are being taken advantage of....one is shift pay instead of hourly and some workers can do 10 hours a day or over 40 for the week and not get paid time and a half...
The people that do get paid hourly and go over 40 hours have had their 6 or 7 hours overtime moved to their next pay period and the following weeks hours cut, clearly illegal....
And this is a 5 billion dollar company, just the guy running the department is a prick and we want him out
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BIG RED FLAGS.
As others have pointed out, you are not taking a new job where they are employing you as an independent contractor, because being an independent contractor precludes your being employed by the company that is "hiring" you.
Make sure you review your contract very carefully, and talk to an attorney and/or accountant if anything seems out of sorts, or if you don't understand something.
Also, make sure you read the IRS links regarding being an independent contractor, which were linked earlier in this thread.
FYI, that is not necessarily illegal. In most jurisdictions, overtime can be calculated on average hours worked per week over a given amount of time, not just whether you went over 40 hours in a given work week. Most companies, of their own accord, don't work this way and will pay OT for any hours over 40, but that isn't how the law itself is written.
Your best move is to register as a C-corp or LLC. I would look at doing this in Delaware or Navada. This will protect you if things go bad and you need to close down your corp. You will need to likely get an accountant to help you with your taxes but you get some nice write offs.
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if you will be working directly for the company as a contractor you may be able to go in as corp to corp. If you are a subcontractor they may not allow you to do anything but go in as a w2. If you are considered corp to corp and set up a corporation you probably can write off transportation expenses.
Just to clarify a few things... It's a foreign company that will have me working with some people on the ground here. Mostly as a 'consultant'. I'm keeping my current job so I'm not really worried about the benefits. this is essentially just a full time flex job.
Just curious as to what is the best route to get paid avoid the IRS? Just deposit the checks in to my personal account worry about the taxes at the end of the year, start an LLC, keep all those expenses seperate, etc. I probably need to speak with an accountant but I understand its a bit busy for them now. My agreement essentially starts April 21st so looking to do this sooner rather than later.
Just curious as to what is the best route to get paid avoid the IRS? Just deposit the checks in to my personal account worry about the taxes at the end of the year, start an LLC, keep all those expenses seperate, etc. I probably need to speak with an accountant but I understand its a bit busy for them now. My agreement essentially starts April 21st so looking to do this sooner rather than later.
1) Get incorporated and make a S-corp election - this makes the company a "pass-through" company.
2) Set up a corporate checking account.
3) Get a corporate credit card.
4) Have the company you are working for direct deposit your pay into the corporate checking account.
5) Use your corporate account for all business related expenses - there are many.
6) Set up a monthly pay-roll where your company pays you a "reasonable" wage.
7) After you subtract out your expenses, payroll etc. any remaining funds "pass though" to you.
8) Hire an accountant that specializes in owner-operator S-corps that can explain all the above details and more including SEP and the tax advantages of this set-up. Hand over your 1099 and your checking account and credit card records and let them do what they do.
There are many tax advantages and legal advantages to getting paid on a 1099 and having your own company if you do it right. However, make sure you pay yourself something or the IRS will coming looking for you.
2) Set up a corporate checking account.
3) Get a corporate credit card.
4) Have the company you are working for direct deposit your pay into the corporate checking account.
5) Use your corporate account for all business related expenses - there are many.
6) Set up a monthly pay-roll where your company pays you a "reasonable" wage.
7) After you subtract out your expenses, payroll etc. any remaining funds "pass though" to you.
8) Hire an accountant that specializes in owner-operator S-corps that can explain all the above details and more including SEP and the tax advantages of this set-up. Hand over your 1099 and your checking account and credit card records and let them do what they do.
There are many tax advantages and legal advantages to getting paid on a 1099 and having your own company if you do it right. However, make sure you pay yourself something or the IRS will coming looking for you.
you need to pay taxes quarterly, and if you don't pay enough, you will be fined/have to pay a penalty. I did an S corporation, but that won't work for every situation. I started a business checking account under that corporation, and received income and paid taxes under that account. I would suggest you speak to an accountant ASAP.
do as PHDKnight said. You may also be able to set it up as an LLC, (I'm not sure of the difference)
Also,
Business related expenses are travel to the customer site. Also, if you go out to dinner with the "customer"
If you go to an RU away game see if a potential "customer" wants to go with you then deduct the expenses.
Section off a portion of your house, study, room, or whatever and deduct it as a home office.
Buy yourself a new laptop or computer deduct the cost.
Cell phone expense can be deducted if a portion of this cell phone is used for business.
Also,
Business related expenses are travel to the customer site. Also, if you go out to dinner with the "customer"
If you go to an RU away game see if a potential "customer" wants to go with you then deduct the expenses.
Section off a portion of your house, study, room, or whatever and deduct it as a home office.
Buy yourself a new laptop or computer deduct the cost.
Cell phone expense can be deducted if a portion of this cell phone is used for business.
Since its a foreign company you want to make sure you don't create foreign tax liability. You can go over for meetings but don't go over there and work. Those foreign employees, don't ever pay them in the US in any way shape or form if they help you out.
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if you follow the IRS link above you will see more on evaluating Independent Contractor vs. Employee. ICs get no overtime of course.
Presuming the employee is an hourly non-exempt from overtime, in most states that are not California working a day longer than 8 hours is not overtime. Its 40 hours in a week that is the trigger for overtime eligible employees. Who is eligible for OT or non-exempt in the lingo can get a little complicated.
If they are shifting the recording of hours from one week to another to avoid paying overtime that is a violation of the Fair Labor Standards Act (FLSA) which is federally administered by the US Department of Labor Wage & Hour Divison
Now if this is in New Jersey the Feds will refer you to the NJ DOL Division of Wage and Hour Compliance for making a claim. The NJ law is a little more stringent than the Feds and the agencies have a agreement that NJ will screen all claims generated in the State. The link will take you there. Not in NJ I would check with the state in question.
Size of the company has nothing to do with it. The huge retailer based in Arkansas was guilty of having people clock out and continue working to avoid OT. Bentonville blamed local management. Likewise some of the richest companies in Silicon Valley have been guilty of "sheep dipping" employees and calling them ICs though they do the same work at the same desk.
1. Set Up an LLC. Easy and inexpensive in NJ, you can do it online. The LLC is to protect you. You can file as a sole proprietor, but you will have no protection. You don't need an attorney its just a simple LLC, but if complicated, and you don't understand something legal your accountant tells you, by all means, get the opinion of an Attorney.
2. Have your accountant explain to you how to run your business from an accounting standpoint. Income goes to your LLC, then income flows to you through various means such as expense reimbursements and payroll. Obviously the less you take in pay, the less taxes you will pay personally, but leftover money in LLC will be taxed. But as a business owner, you will be able to make loans and get loans, and maximize your deductions, and these decisions will help minimize taxes. Again, your accountant will explain this to you. You will also have to file a return for your LLC.
3. Make sure you pay your estimated taxes if applicable and make sure you get enough money to account for health Insurance, time off for sick days and vacation, business insurance if applicable, etc.
4. Good luck.
I would strongly recommend an LLC, the biggest reason is your own protection, you need to separate your business and your personal finances. The LLC (Limited Liability) in essence becomes your financial shield. also as suggested above there are significant financial advantages for deducting expenses including some percentage of you home expenses assuming you work from home. I would not screw around spend the $500.00 bucks and get it done right through an attorney. would also suggest your wife be an officer of the company and then you can both utilize a SEP. You don't want to get paid through a 1099 rather create a company invoice for projects and payments including expenses. Get a good accountant as well I wouldn't even attempt to do my taxes, you cannot keep track of what the IRS does or doesn't do on an annual basis.
Go to a CPA.
There is a lot of almost correct information here.
If you form an Single Member LLC and DO NOT elect to treat it as a corporation for tax purposes, the IRS will treat it as a "disregarded entity" and any income you earn will flow through to your individual 1040.
If you elect to treat it as an S corp, the corporation can pay you a "salary" which you have wide latitude in determining. It can then declare a dividend with the residual income. Since you are the sole member of the corporation, you get the dividend. The dividend is taxed at the capital gains rate, which is presumably lower than your ordinary income rate. Thus resulting in a net tax savings.
All that said, your situation may or may not fit in with the above generalities. Spend the $250 bucks for an hour of a CPAs time.
GENERALLY speaking, the IRS will allow you one year of "whoopsie" as it relates to not paying quarterly pre-payments on your taxes. When you show up next year with a huge tax liability, they will put you on mandatory quarterly payments. The first year, there is no "huge penalty or fine." That's hyperbole of the highest order. Year 2 is a different story.
One obvious piece of advice, that most people roundly ignore, is to set the tax monies aside. You are on the hook for yours and the your employer's portion of SS. A lot of people forget about that extra 7.5ish%.
Also, be frank with the CPA about your roles and responsibilities. The IRS's determination of Contractor has changed dramatically over the last decade or so. There is now a multi pronged test to determine if you are or aren't. For example, if your work product is 100% guided by a person at the firm? that in and of itself may disqualify you.
There is a lot of almost correct information here.
If you form an Single Member LLC and DO NOT elect to treat it as a corporation for tax purposes, the IRS will treat it as a "disregarded entity" and any income you earn will flow through to your individual 1040.
If you elect to treat it as an S corp, the corporation can pay you a "salary" which you have wide latitude in determining. It can then declare a dividend with the residual income. Since you are the sole member of the corporation, you get the dividend. The dividend is taxed at the capital gains rate, which is presumably lower than your ordinary income rate. Thus resulting in a net tax savings.
All that said, your situation may or may not fit in with the above generalities. Spend the $250 bucks for an hour of a CPAs time.
GENERALLY speaking, the IRS will allow you one year of "whoopsie" as it relates to not paying quarterly pre-payments on your taxes. When you show up next year with a huge tax liability, they will put you on mandatory quarterly payments. The first year, there is no "huge penalty or fine." That's hyperbole of the highest order. Year 2 is a different story.
One obvious piece of advice, that most people roundly ignore, is to set the tax monies aside. You are on the hook for yours and the your employer's portion of SS. A lot of people forget about that extra 7.5ish%.
Also, be frank with the CPA about your roles and responsibilities. The IRS's determination of Contractor has changed dramatically over the last decade or so. There is now a multi pronged test to determine if you are or aren't. For example, if your work product is 100% guided by a person at the firm? that in and of itself may disqualify you.
Social Security, Medicare, etc taxes are only paid on Wages. The amount on which you classify as dividends, you do not pay social security taxes etc. its treated as a short term capital gain, which is the same as ordinary income, from what i can remember, as its been a while.
below is a link to the irs website, which talks about paying yourself.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Paying-Yourself
Listen To Hudson...He's Right On
I was a 1099 for the last 8 years. You can write off expenses (such as mileage, meals, business expenses- but have to pay self employment taxes). And make sure your CPA figures out what your quarterly estimated taxes will be....and pay them.
On the other hand, last year I formed an S corp that was paid by an LLC (I'm a partner). The S corp is great. It allowed me to open a 401K and contribute to the greatest mind, producer and employee my company has ever known: ME!
In fact I'm giving myself a raise now as we speak!
MO
I was a 1099 for the last 8 years. You can write off expenses (such as mileage, meals, business expenses- but have to pay self employment taxes). And make sure your CPA figures out what your quarterly estimated taxes will be....and pay them.
On the other hand, last year I formed an S corp that was paid by an LLC (I'm a partner). The S corp is great. It allowed me to open a 401K and contribute to the greatest mind, producer and employee my company has ever known: ME!
In fact I'm giving myself a raise now as we speak!
MO
Re: Listen To Hudson...He's Right On
Does New Jersey recognize S Corps? I always thought LLC electing to be treated as a S Corp was a good way to go, but then I read how NY treats corporations (including S corps) and my head almost exploded. I wonder if it is similar in NJ?Originally posted by RutgersMO:
I was a 1099 for the last 8 years. You can write off expenses (such as mileage, meals, business expenses- but have to pay self employment taxes). And make sure your CPA figures out what your quarterly estimated taxes will be....and pay them.
On the other hand, last year I formed an S corp that was paid by an LLC (I'm a partner). The S corp is great. It allowed me to open a 401K and contribute to the greatest mind, producer and employee my company has ever known: ME!
In fact I'm giving myself a raise now as we speak!
MO
Re: Listen To Hudson...He's Right On
These are the steps I remember
Step 1 - file articles of incorporation with the state
Step 2 - Obtain tax Id number from irs.gov
Step 3- fill out s corporation form declaration if needed with the IRS
Step 4 - Open corporate bank account (bring articles of incorporation and provide tax id#)
Step 5 - Enroll in eftps.gov. (This site allows you to make your quarterly federal tax payments)
These are the steps I remember
Step 1 - file articles of incorporation with the state
Step 2 - Obtain tax Id number from irs.gov
Step 3- fill out s corporation form declaration if needed with the IRS
Step 4 - Open corporate bank account (bring articles of incorporation and provide tax id#)
Step 5 - Enroll in eftps.gov. (This site allows you to make your quarterly federal tax payments)
Hudson
How is the dividends in a C corporation distributed?
Would you know.
Hate leaving money in the company to have 25% taken taxes off the top.
Having a solid year and trying to defer money left over after drawing salary and funding a SEP at 25% of salary.
How is the dividends in a C corporation distributed?
Would you know.
Hate leaving money in the company to have 25% taken taxes off the top.
Having a solid year and trying to defer money left over after drawing salary and funding a SEP at 25% of salary.
I think you have to pay yourself a reasonable salary and then the remaining can be distributed as dividends and taxes differently. Also, from what I have read a Solo 401(k) may be a better option than the SEP.
Lots of good advice.
I am in Florida but most of what you are talking about are IRS or Social Security type issues which would be the same. State income tax may have some bearing on what you do.
#1 - Do not put the checks from the new company into your regular bank account. Start a new account. It would be best if you knew the name (entity) of your new company and got it registered with the state so the new account would be in the name of the new company.
But, if you can not see an accountant before you get it set up, either hold the checks or open an account which you can change but do not commingle W2 income and 1099 income because you will have a hard time figuring it out at tax time.
#2 - Send in money to the IRS on a regular basis. Be it quarterly, monthly or whatever, do not screw this up and spend the money or you will get behind when it comes to file your return.
#3 The accountant can tell you what type of business entity (LLC) or C Corp etc, depending on what you want from it. Say you want a LLC and you make $100,000 in this second business. You would probably have to pay yourself about $40,000 in W2 earnings (which will be about $50K after you add in taxes and social security which is 15%. You can then make a SEP IRA contribution of 25% of your W2 income, or $8,000 which comes off the remaining $50,000. This leaves about $40,000 to pass through at capital gain rates. As someone stated above, you can further lower this by paying all legitimate expenses from the $40,000 and probably get it down to say $20K.
Another entity option may allow you to contribute more to some type of tax deferred program, but may have a higher tax rate on the remainder.
Not that it matters what I do, but here goes:
I am retired military and I receive a pension which is large enough to live on and I do not need income from a second career to get by. I have a second career as a real estate appraiser. The appraisal business is an LLC.
Payments for appraisal services are paid to the LLC.
The money goes into a separate checking account. I also have a debit card for this account. I pay a lot of small expenses via direct withdrawal from this account and use the debit card for other expenses.
About three times a year after money builds up, I send the IRS $25,000 for a total of $75,000.
In the middle of December, I see what is left and my accountant and I compute what I can take, how much I need to contribute for taxes and social security and a SEP IRA contribution.
I write myself one W2 paycheck for the year.
This makes record keeping for the business very easy as it is all on one account and very self contained.
You will also probably have some type of unemployment reporting requirements to your state.
______________________________________________________________________________________________________
I recognize that some will tell you that I am not very smart as I should take the money and invest it or use it rather than let the IRS have it interest free. That is a fine academic argument, but my many years of life tells me that I would spend a lot of it. When you get one big chunk, you can do something with it.
None of this will matter to you if you need the additional money each month. You will write yourself a check from the business account to your personal account based on what total W2 income you have decided to pay yourself after talking to the accountant.
______________________________________________________________________________________________________
I would think one thing you need to talk to the accountant about is how much W2 income do you make in your first job. There would be no point in having more W2 income that the social security maximum or even to the maximum (my opinion) as social security will almost certainly change as there are more recipients and fewer payors. This would influence me to cut the W2 income from the second job down to as low as I could get it.
______________________________________________________________________________________________________
Finally, what you are talking about needing to do here is VERY EASY.
The big things are not commingling the 1099 income with the W2 income and starting to send some into the IRS on a periodic basis so you do not have a big tax liability at tax return time.
Good luck
I am in Florida but most of what you are talking about are IRS or Social Security type issues which would be the same. State income tax may have some bearing on what you do.
#1 - Do not put the checks from the new company into your regular bank account. Start a new account. It would be best if you knew the name (entity) of your new company and got it registered with the state so the new account would be in the name of the new company.
But, if you can not see an accountant before you get it set up, either hold the checks or open an account which you can change but do not commingle W2 income and 1099 income because you will have a hard time figuring it out at tax time.
#2 - Send in money to the IRS on a regular basis. Be it quarterly, monthly or whatever, do not screw this up and spend the money or you will get behind when it comes to file your return.
#3 The accountant can tell you what type of business entity (LLC) or C Corp etc, depending on what you want from it. Say you want a LLC and you make $100,000 in this second business. You would probably have to pay yourself about $40,000 in W2 earnings (which will be about $50K after you add in taxes and social security which is 15%. You can then make a SEP IRA contribution of 25% of your W2 income, or $8,000 which comes off the remaining $50,000. This leaves about $40,000 to pass through at capital gain rates. As someone stated above, you can further lower this by paying all legitimate expenses from the $40,000 and probably get it down to say $20K.
Another entity option may allow you to contribute more to some type of tax deferred program, but may have a higher tax rate on the remainder.
Not that it matters what I do, but here goes:
I am retired military and I receive a pension which is large enough to live on and I do not need income from a second career to get by. I have a second career as a real estate appraiser. The appraisal business is an LLC.
Payments for appraisal services are paid to the LLC.
The money goes into a separate checking account. I also have a debit card for this account. I pay a lot of small expenses via direct withdrawal from this account and use the debit card for other expenses.
About three times a year after money builds up, I send the IRS $25,000 for a total of $75,000.
In the middle of December, I see what is left and my accountant and I compute what I can take, how much I need to contribute for taxes and social security and a SEP IRA contribution.
I write myself one W2 paycheck for the year.
This makes record keeping for the business very easy as it is all on one account and very self contained.
You will also probably have some type of unemployment reporting requirements to your state.
______________________________________________________________________________________________________
I recognize that some will tell you that I am not very smart as I should take the money and invest it or use it rather than let the IRS have it interest free. That is a fine academic argument, but my many years of life tells me that I would spend a lot of it. When you get one big chunk, you can do something with it.
None of this will matter to you if you need the additional money each month. You will write yourself a check from the business account to your personal account based on what total W2 income you have decided to pay yourself after talking to the accountant.
______________________________________________________________________________________________________
I would think one thing you need to talk to the accountant about is how much W2 income do you make in your first job. There would be no point in having more W2 income that the social security maximum or even to the maximum (my opinion) as social security will almost certainly change as there are more recipients and fewer payors. This would influence me to cut the W2 income from the second job down to as low as I could get it.
______________________________________________________________________________________________________
Finally, what you are talking about needing to do here is VERY EASY.
The big things are not commingling the 1099 income with the W2 income and starting to send some into the IRS on a periodic basis so you do not have a big tax liability at tax return time.
Good luck
As others have stated. Don't skimp. Talk to a CPA. I had a C-Corp for 12 years. Completely separate from you and your individual tax returns. S-Corp and LLC returns directly flow (in most cases) to your individual return. C-Corp does not directly flow. Not to look at downside, but C-Corps have some benefits (don't recall exactly) in bankruptcy situations. Talk to a CPA.
Be VERY careful regarding independent contractor status. As others have linked, you need to "pass" a bunch of sniff tests. The biggest one IMHO is "do you control your schedule?" If the company you will contract with dictates when and where you work, then you are not an independent contractor in the eyes of the IRS. Also, most legit companies will only contract at most in one-year intervals. i.e. they will renew your contract annually or sooner. This goes back to the "sniff tests". I would not agree/sign to a term greater than one year. Again ask your CPA. Good luck.
Be VERY careful regarding independent contractor status. As others have linked, you need to "pass" a bunch of sniff tests. The biggest one IMHO is "do you control your schedule?" If the company you will contract with dictates when and where you work, then you are not an independent contractor in the eyes of the IRS. Also, most legit companies will only contract at most in one-year intervals. i.e. they will renew your contract annually or sooner. This goes back to the "sniff tests". I would not agree/sign to a term greater than one year. Again ask your CPA. Good luck.
Good point. I had/have a $3 million dollar personal umbrella policy, and had to carry a $1 million "errors and ommissions" policy as an IT consultant. You can be sued personally while performing your job duties. i.e. running a red light on the way to a client site, and putting someone in the hospital. You and your company will most likely get sued.
The best advice given here...Talk to your accountant. He'll know your situation and the best way to protect you.
