Free Agency via FreeAgent.Com?

heiho1 asks: "I recently began consulting through a service known as Freeagent.com. It is a company which is hyped as a 'virtual corporation' for 'free agents'. The idea is that you work as an employee of a corporation but you are free to set up contracts with your own clients. You pay a monthly fee to Freeagent.com for their services [something like $220/month]. You provide the services and Freeagent handles invoicing, lawyers, $5 million in liability insurance, accounting, etc. They also provide re-imbursement for expenses. The last part is interesting because they do not allow for many of the typical business expenses [for example, computer hardware (my PowerBook!) is not considered an expense even though I would normally depreciate such an item as a corporate expense]. All in all they are supposed to save you time, money and headache. I've gone the incorporation route before and am trying this out to see if it does save me grief. I'm interested in the opinion of Slashdot about the pros and cons of such an approach. How does it compare to just owning your own corporation or LLC and getting your own accountant?" There's more on the site than just ways to get work as a freelancer, there's legal advice and discussions on the site as well. Is this the future of freelancing?

Comments

Forget Inc. just do it.

[Kefaa]

Unless they are offering you contacts, you are really not getting much.

Assuming a one person shop, you file a schedule C and are done. You are no longer able to protect your assets in by incorporating and it just costs you additional taxes.

Then join the Chamber of Commerce and figure expenses this way:
Health ~250 / month
Liability - contact an agent this is state specific
Life - you specific
~7.5% - additional tax (you pay both sides of Social Security/Medicare)

Now you get to write off everything, including the powerbook, training, home office, etc. plus you can max out your own retirement plan.

Once again, unless they are offering to locate contracts for you, or you are "risk adverse", stay solo.

Good luck...
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IANAL, but I sometimes sound like one on the web... ;-)

Risk Adverse - anyone who for personal reasons cannot accept the potential of being unemployed, even if economics are factored in.
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Re:Forget Inc. just do it.

[damiangerous]

Unless they are offering you contacts, you are really not getting much.

Well, they do offer contacts, but you still don't seem to be getting much. The field of "Technology" comes up with 63 biddable projects. Everything from Unix admin, to VB programmer, to "work at home, send for info" type jobs, only a small portion of which any given person is likely to be qualified for.

Re:Forget Inc. just do it.

[piscine]

Agree that Schedule C makes sense for many. But I'd guesstimate that IRS audit risk for a $200K corp. is at least five times less than audit risk for someone grossing above $200K on Schedule C.

The cash value of reducing that risk is hard to quantify: depends on the industry & the aggressiveness of the taxpayer.

Read alt.computer.consultants.moderated

[goingware]

Please read alt.computer.consultants.moderated on the Usenet News. You will certainly find it very helpful.

Also see my web pages:

• Market Yourself - Tips for High-Tech Consultants
• Important Note to Recruiters and Contract Agencies

Best of Luck,

Michael D. Crawford
GoingWare Inc

Re:Read alt.computer.consultants.moderated

[jdevons]

I would agree with this. The articles posted at this site are actually quite good.

In addition, I would try to use local services such as local job boards and state agencies.

I got a list of the 400+ Information Technology companies for $11.00 from the State of Utah... I also found a very similar list a few days later on the internet for free, but $11 is still cheap... ;-)

Another Alternatvie

[jconley]

I used FreeAgent.com and was very disappointed with their services. I now use ZeroChaos. I have found them responsive and caring. They actually assign you to a individual service rep who will take care of everything.

ZeroChaos.com

[shyam]

I too use Zerochaos.com; I cannot compare it to freeagent for I have not used them- however I can say that Zerochaos saves me time and money by handling the administrative overhead.

Why incorporate (or not)?

[piscine]

Some independent consultants will have significant tax advantages from doing business as a C-corporation. Deducting health insurance premiums & unreimbursed medical/dental/vision expenses is reason enough for many. But for healthy twenty-somethings, the net tax benefits of these costs may be immaterial.

If you've got a long-term gig (over 6 months), the general contractor may insist upon your incorporating. Their fear is that the IRS will look thru the IC contract, say thay the underlying reality is employer-employee, and collect the unpaid payroll taxes from the the general contractor. (I believe that in the past, Microsoft has had IRS trouble with this issue.) Incorporation doesn't automatically refute the employer-employee presumption, but it sure helps.

Some states are friendlier to corporations than others. Illinois is relatively low-cost & low hassle; my understanding is that the cost in California is significantly higher. For plain vanilla C-corp, figure $1,000-1,500 as the average downstroke for doing it right (with cheap competent counsel).

Finally, C-corps have to "bonus out" each year to avoid double taxation. This is a real hassle that will generate another bill from your CPA. S-corps don't have to go thru this, but have corresponding disadvantages.

Best advice: ask your successful friends to recommend a tax professional.