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To Inc. or Not to Inc.?

Posted by Cliff on from the that-is-the-question dept.

rikkards asks: "I have just started as a contractor for a government office and am doing this through a recruiter. Said recruiter is saying I may want to incorporate myself. I am wondering if it is really a good thing. I am not sure whether or not I want to stay as a contractor for the rest of my career. The money is decent coin (for today but maybe not 2 years ago). Does anyone have any pros/cons on doing this? If I do it soon the recruiter will do it for me."

1 of 29 comments (clear)

  1. Don't bother by Ratbert42 · · Score: 4, Interesting
    Don't bother unless you have a free accountant. I've been through the math and I just can't justify all the hassle for what little I'd save. Sure, a bunch of people that have never done this will tell you that you can deduct your car payment, part of your house, etc. But when you start doing that stuff, the corporation owns that car and part of your house. Sell your house and you've got twice the tax hassle. Plus, chances are that you'll only do this for 2-3 years.

    Go with a simple sole proprietorship. Use your own name like "Joe Smith's Services" and you'll save about $150 and 2 hours spent getting a DBA. Lease what you can, like computers, and it's easy to deduct that cost. Don't build up any assests in the company and you don't have to deal with depreciation. Your taxes are easy enough that you can do them yourself.

    Don't forget health insurance. See if your state has an open enrollment period for the self-employed. Get into a plan then, even if you're on COBRA at the time.

    If you do incorporate, beware of that friendly recruiter. There are a ton of places that will file everything for you for as low as $150. If the recruiter wants $1,000 or more, he's ripping you off.