|laziness, impatience, and hubris|
Re: Should a consultant incorporate (and how)?by Jayson (Novice)
|on Jan 11, 2009 at 21:23 UTC||Need Help??|
Oddly enough, Bear Stearns managed to put me out of work, too, through the fallout, I live in NJ and am looking at consulting again, too. :) We're probably looking at the same job market so I'll give my perspective.
There are those who "consult", but are actually W-9 employees of consulting firms. It doesn't look like you'll be trying those and want to investigate life as a 1099. I consulted for two gigs for three years at major banks. I've made about every mistake you can on your own when creating a corporation so have paid my dues (read fines). You can do everything on your own it will just cost you money for mistakes. Fortunately, it's all a business expense. :-/
Yes, you can create your own corp and it will be fine. Be prepared for an avalanche of snail mail and to stay consistently on top of it. I didn't, but I learned. I created my own S-Corp and somehow I managed to screw it up and got different employer identification numbers between the Federal and NY systems. A paper war later that was resolved. At least that problem didn't cost much money, but I needed my accountant to explain to me what the disaster was.
LLC's are in vogue now because there is supposedly an increase in audits on S-Corp's. But statistically speaking, that's like being twice as likely to be struck by lightning where the odds are still next to nil. (given that you aren't doing any fancy bookkeeping).
If you think personal taxes are dreadful, wait til you get to do the same thing four times a year. It's not a catastrophe if you don't, you just get fined. :) Ultimately, you will gleefully pay extra for an accountant. The only trick is finding a good accountant. One who will explain things to you and not magically provide you a dollar figure for a refund. Some accountants *are* lawyers so you can avoid the attorney cost. Mine works in a law office so I get the same benefits. At least I think so. I never hired an attorney, I never needed one.
Your corp will pay you a salary, it's a myth that you will sidestep Social Security and other taxes by paying a dividend to yourself rather than a salary. It all works out the same unless you want to increase your chance of getting struck by lightning.
Yes, you can deduct everything. In this process you will learn that you can deduct *everything* (is that a storm cloud cloud overhead?). In many cases, you can deduct buying books, etc as a W-9 employee. In a corporation, even more so.
I wouldn't worry too much about getting audited or getting sued for your work. Yeah, it happens, but thinking about those things will paralyze you from taking action. The worst thing that would happen from an audit it that you pay more taxes and fines. And if you screw something up so badly that a giant bank sues you, your corporation won't protect you anyway.
Your time should be spent worrying about getting gigs and collecting money for your work. Good luck! And private message me if they need two consultants. ;)