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Shell Companies for Contractors?

Posted by Cliff on from the resources-for-freelancers dept.

dubl-u asks: "What do my fellow freelancers feel about the various shell companies out there? I've got a chunk of work coming up at a place with an especially persnickety contracts department, and I'll probably need to go through a third-party shell company. I used one a couple of years back and they were ok, but there are a lot of them out there, and I'd love to hear about real-world experiences before I sign up. For those unfamiliar with this part of the business, it goes like this: I find my own work; the shell company hires me as an 'employee' and handles my billing and tax withholding for me. Some also 'provide' things like health insurance and 401k plans, although I have to pay for it. You can think of it as outsourcing a lot of the paperwork of being a freelancer. Some outfits, large companies especially, demand this sort of thing."

3 of 42 comments (clear)

  1. Spent most of my carrerr doing this by mpechner · · Score: 5, Informative
    If you can get a 1099 out of the "shell", do that. One of the advantages of being a 1099 contractor is deducting that new laoptop. Almost not worth the deduction as a w-2 employee.

    If you are bring in the contract, and have the rate set, they should be getting no more than 25%. Remember, as a w-2, they have the costs of social security, worker comp, libabilty and their staff.

    On a 1099, no more than 10%.

    If you feel you will be getting more of these, put together a LLC if you have one other friend also contracting. Two employee make for a group health plan under California law.

    Do not let your health insirance lapse for more than 59 days. Otherwise under federal law the health insurance companies can absolutely screw you. Can we all say Pre-existing Conditions.

    I can write several pages on this. Anybody want advice, read all the postings and contact me.

    I've been a indepentant contractor, gone through agancies, been a salaried employee of several body shops, worked for beltway bandits. 21 years of this.

    Bottom line, do a 1099 if you can. Do not under any circumstance let your health insurance lapse for more than 59 days.

    1. Re:Spent most of my carrerr doing this by count3r · · Score: 5, Interesting
      If you feel you will be getting more of these, put together a LLC if you have one other friend also contracting. Two employee make for a group health plan under California law.

      Actually, many large companies (including mine) are even more restrictive-- not only do they require a contractor to work for a shell company, the shell company needs to be on a (usually short) list of approved vendors.

      Forming your own shell doesn't solve this...

  2. Did anyone else.. by mivok · · Score: 5, Funny

    see 'shell company' and start formulating a reply along the lines of.. 'yeah, theres plenty, but few will let you run eggdrops/bnc servers.. etc..etc..'?