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Best Billing Options for a Contract Position?

Posted by Cliff on from the understanding-the-fine-print dept.

ffatTony asks: "I've finished college and found a great job, but now I'm surrounded by a number of contracting options without any real explanation of why one is better than the other. I hoped the more experienced among you could provide some insight. The three options presented to me are (1)Corp to Corp (100% payrate), (2)Independent Contractor (86% payrate), and (3) W2 Employee (62% payrate and a moderate weekly expense stipend). I understand that for the first two, I will need to pay self-employment tax. And in the first case I'll need to start a corporation (<$100, I'm assured), get an insurance policy, and workman's compensation. I'd like to hear about your experiences and any hidden fees that may be associated with each option. What do you all suggest? (Yes I'm going to talk with an accountant as well). Also can anyone suggest an online source that explains exactly what is tax deductible."

3 of 282 comments (clear)

  1. your time is the real cost by terpia · · Score: 5, Insightful

    Having done this (option 1) I can assure you that the greatest hidden fee is the incredible amount of time spent trying to figure out what the hidden fees are and who needs to get paid for what license/program. What a nightmare, for me at least. Who knew that the evil HR department ever *actually* did anything? To save yourself countless hours of frustration, go with option #2. Unless you plan on going this route for at least a few years, avoid all the extra soul sucking paperwork of option 1, it's a negligable amount of extra money and a significant amount of extra work and time. Luckily I have a friend who works for the bbb who gave me all the info I needed and spent almost as much time getting me started as I did. If you go the route of option #1, make sure you've got some competent friends or relatives who know the ins and outs of your state's business laws.

    --
    .sig wanted: Must be concise, funny, and display my cleverness.
  2. Welcome... by homebru · · Score: 5, Insightful
    I hoped the more experienced among you could provide some insight.

    Welcome to the game of life. The game-clock is running and we are keeping score. If you don't already know the rules of the game, then you really don't want to try to learn them while the game is in progress.

    Seriously, until you have a clue about taxes, insurance, liability, and a zillion other things, start off as an employee. Employees don't get rich, but they (generally) don't get sued when their code isn't what the customer didn't tell you they wanted and employees don't get hounded by the Internal Revenue Service for "forgetting" to pay their taxes.

    Once you figure out the rules or get a better personal support team than slashdot, then you can think about the subtleties of a Sub-S Corporation.


    There only piece of insight you need is to know that

  3. Re:Tax Considerations, Most Likely by sakyamuni · · Score: 4, Insightful

    As you don't state whether you are in the U.S. or not, I will assume that you are.

    The recommendation regarding an S-corporation is sensible. If you are inclined to go that route, I would, however, advise you to consider a Limited Liability Corporation (LLC). This structure provides less stringent reporting requirements and is considerably easier to set up and run. The statutes of most, if not all, U.S. states allow single-member LLCs.

    For more information regarding LLCs, S-corporations, other legal structures, and sundry issues concerning small business, I refer you to the Small Business section of Nolo's Law Center. I can also highly recommend their library of legal self-help books catering to the (prospective) small business owner.