May 21, 2015 at 9:54 am
All,
My previous employer has asked me if I would like to contract with them for 8 hours a week at nights doing some DBA and other IT work. I said sure but for them to hire me, I need to either work with a contracting company or I need to self contract. I like the idea of self contracting, but apparently I need to get a business license, insurance, etc. I'm sure there are plenty of people here with contracting experience. How difficult is this to set up and do you have any good resources for me to review to start working on this?
Thanks.
May 21, 2015 at 10:20 am
The advice would be country-specific, so you probably want to spell that out clearly.
The very first question is: how solid is this and how much of a long-term commitment is there? Going the self-employed, self contracted route can take up a fair amount of time to set up and would add new tasks that have to be handled (such as business taxes et al.) so be sure it's worth the extra time and effort before engaging too far. I am not sure I would put myself through self-employment if it's only for 8hr/week with no timeframe commitment: as much as it might be distasteful to "give money up" by using an agency - it might still end up being cheaper and easier to do that than to take it all on yourself.
-----------------------------------------------------------------------------------------------------------------------------------
Assuming you still want to go self-employed:
In the US - I would start with the Small Business Administration site, which would give you a lot of insight into the various pros and cons of which way to organize your corporate entity. Another fairly solid point of input would be a local Better Business Bureau: depend on how active they are in your area - they might be able to put you in touch with folks who incorporate a fair amount who can give you a bit more of a real feel for the various options (pros and cons - level of protection and what you have to do to keep the paperwork and authorities happy with you, etc...). Ask a LOT of questions around who and what to report (missing even one agency you should be registered with can be an expensive mistake).
Once you've figured out what kind of company you want to be (and you don't just go in as an individual) - go through one of the various sites that help you set things up, so that they can facilitate all of the initial registrations. Once you have the licenses and ID's you need, there may be a few more forms to fill out to get registered with the agencies mentioned previously.
You can also start the conversation around getting the appropriate insurance once you have your initial federal registration set up: you're looking for "Errors and omissions" insurance. You'd want your coverage limits to be at least as high as what your former corporation demands, so try to understand their minimum required limits.
----------------------------------------------------------------------------------
Your lack of planning does not constitute an emergency on my part...unless you're my manager...or a director and above...or a really loud-spoken end-user..All right - what was my emergency again?
May 21, 2015 at 10:35 am
Thanks for the information. So it sounds like contracting through a company may be the way to go as I'm only expecting a max of 10/hr per week. Is there a good way about contacting a company to work on this?
May 21, 2015 at 10:50 am
You can probably find a local company that will do all of the admin work for you and pay you as a W-2 employee.
They are going to want a percentage of your hourly rate, so you will need to charge accordingly.
I have done this successfully in the past. I found the work, negotiated the rate, and the local angency did all of the rest.
The time sheets, invoices, etc. etc looked a lot more professional than my home grown paperwork.
Don't limit yourself on searching for a company that may be IT staffing related. The agency I worked with was actually a janitorial / cleaning crew agency.
Michael L John
If you assassinate a DBA, would you pull a trigger?
To properly post on a forum:
http://www.sqlservercentral.com/articles/61537/
May 21, 2015 at 10:55 am
i did a gig self contracting with a previous employer before, and they gave me a 1099 when it was done.
don't let them rope you into "we'll pay you the same amount per hour as when you were working before"
your expenses are substantially more. 1099 you pay approx double the social security taxes vs W2. This is because you pay the employer's portion and the employee's portion on 1099 versus only paying the employee portion on W2. This is an extra 7% extra in taxes out of your pocket. since you are paying for your own insurnace, 401K/IRA, there's that additional differnece as well.
additionally, since you have to withhold you own taxes, you need to mentally realize if you got a check for $1000 dollars, you need to bang a check to the IRS for 250 of it,(approx, ont he average)
so same rate you got before costs you headaches ot pay taxes, and you get paid 7% less right off the top.
Lowell
May 21, 2015 at 11:03 am
i found a good rule of thumb example here, comparing w2 vs 1099:
http://www.city-data.com/forum/work-employment/1535070-how-compare-w2-wages-versus-1099-a.html
Basic Calculator for converting W2 to 1099 ratesW2: $30.00/hr
1099: $32.25/hr min
1099: $45.00/hr max
W2: $35.00/hr
1099: $37.63/hr min
1099: $52.50/hr max
W2: $40.00/hr
1099: $43.00/hr min
1099: $60.00/hr max
W2: $45.00/hr
1099: $48.38/hr min
1099: $67.50/hr max
W2: $50.00/hr
1099: $53.75/hr min
1099: $70.00/hr max
W2: $55.00/hr
1099: $59.13/hr min
1099: $82.50/hr max
W2: $60.00/hr
1099: $64.50/hr min
1099: $90.00/hr max
W2: $65.00/hr
1099: $69.88/hr min
1099: $97.50/hr max
W2: $70.00/hr
1099: $75.25/hr min
1099: $105.00/hr max
W2: $75.00/hr
1099: $80.63/hr min
1099: $107.50/hr max
W2: $80.00/hr
1099: $86.00/hr min
1099: $120.00/hr max
Lowell
May 21, 2015 at 1:54 pm
This is great advice, thanks a bunch.
May 21, 2015 at 4:21 pm
I think Lowell's advice was spot-on. I would definitely go the self-employed route. I started working on my own a couple years ago and wish I had done so earlier. You do pay all of your social security taxes but there are some good tax benefits. In the end I made more and paid a smaller % in taxes (e.g. getting to write-off travel, your home office, etc.) An 8-hour a week gig is perfect if you have a full time job because you get the best of both worlds: paid vacation from one, tax benefits from the other. Business insurance is cheap BTW.
As Lowell said, don't let them pay you what they did before. They know they're not paying your insurance, Social security - that's good for like 15-20% right there. I know that companies typically pay double what a w-2 contractor makes so keep that in mind.
It's worth noting that, though most people talk about "1099" in some cases they are talking about an S-Corp. I think going the S-Corp route is preferable though it is a little more work. I included a good link that I found to be helpful when I started.
-- Itzik Ben-Gan 2001
Viewing 8 posts - 1 through 7 (of 7 total)
You must be logged in to reply to this topic. Login to reply