This thread Will never die!

It's not always as good as it might sound.

1. You are responsible for your own liability insurance, proof of which you will have to supply to your customer

2. You are responsible for your own health insurance

3. Establish a good record tracing system - you will have to track every mile you drive and every postage stamp you purchase.

4. You will pay your income taxes with quarterly estimates. You must pay at least the amount you owed in the prior year or have paid not less than 90% of what you owe for the current year to avoid a penalty.

5. Remember that you are not covered under worker's comp insurance unless you pay your own disability.

6. You lose your right to register for unemployment when you are not working.

7. Customers are not bound to the same legal constraints paying you as they are to paying employees. As a subcontractor, you are no different than any other vendor and the company can stretch your payments out beyond what you expect. You can refuse to work until they bring your account current but you may not have any other income during that time.

8. There is no Vacation pay, sick Pay, Holiday Pay.

9. You will spend a lot of hours on your self-employment record keeping for which you will receive no compensation. Be prepared.

Being self-employed does not always give you the freedom you think it will. It sounds great but every day you take off is dollars out of your pocket. I'm lucky enough to have more clients wanting my time than I have hours to give but it takes its toll. 12 hr days are normal and 15 hr days are common. Sometimes I long to simply be employed and let someone else do all the juggling.

 

Great advice on self-employment!

 

Hooray!!! Baking is done (or rather; I'm finished)!

I used over 10 pounds of chocolate chips, 5# of flour, 15# sugar, 5# almonds, 4# of walnuts, I can't even remember how much butter and countless other ingredients that consumed my kitchen.

The best part is getting to give it all away.

 

Quote:
Originally Posted by RightHand
It's not always as good as it might sound.

1. You are responsible for your own liability insurance, proof of which you will have to supply to your customer
I am working as a contractor for him, and am only supervising, so my liability is virtually nill
Regardless of your level of potential liability, the contractor and his insurance company will require you to carry a certain amount of insurance - could be anywhere from $100,000 to $1,000,000

2. You are responsible for your own health insurance
My wife works and we will be covered on hers, almost as good as we have now, I just have to pay the vision and dental.
Sounds like you've got that covered

3. Establish a good record tracing system - you will have to track every mile you drive and every postage stamp you purchase.
I do that now in my present job, so I am used to that.
Nothing new for you there - continue as before.

4. You will pay your income taxes with quarterly estimates. You must pay at least the amount you owed in the prior year or have paid not less than 90% of what you owe for the current year to avoid a penalty.
I am real curious about this, I have called my accountant, but I think they are off for the holidays. I heard that self employment tax is higher than employee taxes. Is the approximate % about 30%?
You will pay 15.3% self employment tax (social security/medicare) on the net profit from your self employment activities reported on your Fed Income tax return Sch. C. In addition, the net profits become your income for regular income tax - same as reporting W2 wages unless you are a "C" corporation. A "C" Corp is an incorporated business that pays corporate income tax and the earning are not passed to you. You would draw a salary from the corporation and pay your taxes on your wages as if you were working for any other corporation. Another type of corporation is an "S" corp which is pretty much the same as a "C" corp except that the corp does not pay income tax. The earning of the corporation pass to you (and any other shareholders) and you include them in your personal income which is taxed at a lower rate than a "C" corp. With an "S" corp, you also draw a salary subject to tax/soc sec/medcare withholding and reported on a W2. You could also opt for an LLC structure - Limited Liability Company - which is a combination of the sole propriator and corporate structures. You can draw salary or cash from the profits of the business, reportable as 1099 earnings, and still have some of the protections afforded to "C" corps protecting you personal assets from business liability. If you function as a sole propriator (neither a "C" or "S" corp or LLC) you personal assets are vulnerable to any liability as a result of your business activities. If you elect this form, make sure you have very good liability insurance but remember that you and the business are one and the same so all debt assumed is yours and your alone.

5. Remember that you are not covered under worker's comp insurance unless you pay your own disability.
I am thinking about doing AFLAC. Any experience with them?
At one of my clients, I sat in on a presentation by an AFLAC rep but other than that, I know nothing about them or their coverage.

6. You lose your right to register for unemployment when you are not working.
Thought about that, the money while I am working is enough that I should be able to budget through the year. I raised 7 kids when I was making around $24K/yr, so I am very good at budgeting. Plus I am working a second job that I will keep for a while at least to make sure it will be stable.
The ability to get other employment at any time helps


7. Customers are not bound to the same legal constraints paying you as they are to paying employees. As a subcontractor, you are no different than any other vendor and the company can stretch your payments out beyond what you expect. You can refuse to work until they bring your account current but you may not have any other income during that time.
Valid point, I have known this guy for 18 years and has always been very reliable, but anything is possible.
Its always a toss of the coin. Just remember than if the business experiences cash flow problems (which happen even to the best of companies) you will be more vulnerable than a payroll employee. I have had a few clients through the years who have left me hanging for many, many thousands of dollars for a long time. If I believed in the integrity of the business owner, I've hung in with them until they were eventually able to clean up their bill. I've also had a few who have stuck me. Its the cost of doing business.

8. There is no Vacation pay, sick Pay, Holiday Pay.
There are 2 other superintindents that cover for each other when they want to take time off. I am not a big vacation taker in the past, I am looking forward to being able to do it in the future.
As long as you are prepared for the reality of it.

9. You will spend a lot of hours on your self-employment record keeping for which you will receive no compensation. Be prepared.
Is it worth saving your records monthly and using a bookeeper?
A lot of people do that and it is a deductible expense. In addition to routine bookkeeping, you will have tax filing with which you might want help. If your state collects sales tax, you will be required to collect and remit those taxes and that could be monthly, quarterly, or annually.

Being self-employed does not always give you the freedom you think it will. It sounds great but every day you take off is dollars out of your pocket. I'm lucky enough to have more clients wanting my time than I have hours to give but it takes its toll. 12 hr days are normal and 15 hr days are common. Sometimes I long to simply be employed and let someone else do all the juggling.

 

Got to have your priorities in order. God, Glock and Gladys!