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Not sure if my terminology is correct but bear with me. I'm starting a new job next month, but will continue to do projects for my current employer on a freelance basis. We're working out an arrangement in which I bill the company for any days I do work, and get checks made out to "Minidust Consulting" (working title) at a regular interval (2 weeks or monthly). The terms are all sounding good to me, I just wonder if I'm technically supposed to form a business for this to go down properly. LLC? Sole Proprietorship? Since I'd be billing them instead of being an employee on the payroll, I assume there's some technical stuff I'll have to figure out (at least for when tax season rolls around). Thanks, knowledgeable goons.
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May 21, 2019 22:19
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| # ? Apr 26, 2024 16:22 |
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I doubt you need an LLC unless you risk getting sued for doing your job. You'll need to pay your own taxes quarterly, you can do this online easily and there are calculators to estimate what you owe. You will be paying self employment tax, so make sure your billing rate is higher or else the company is just taking you for a ride to avoid employer taxes. When you file taxes, you'll get a 1099 in the mail and you'll file a schedule C. Keep track of any expenses you have, including health care premiums if your new employer isn't paying for it.
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May 22, 2019 13:45
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I don't know the ins and outs, but if you don't have a legal business entity set up, can you cash checks made out to said business entity? Checks made out to "Bob's Consulting" are not technically the same as checks made out to "Bob Smith." You and the company probably don't care, but the banks might pitch a fit. In any case, unless this is a permanent venture you probably want to just subsist as an Independent Contractor. Have all the checks and tax forms made out to you directly rather than your non-existent company. Won't make any financial difference to the company, it just changes the Tax ID on the 1099 and name on the checks. There are probably contractual and liability issues associated with this, so that's another possibility... if you're doing anything that might get you sued maybe then you want to form an LLC or something. If you're just doing BS work for a few weeks for an old employer, probably not worth the trouble.
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May 22, 2019 14:00
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I have been down a few different versions of this, and the easiest solution I found was 1. Register a LLC (this takes like $20 and 5 minutes online in most states) 2. Open a free business checking account somewhere (this is the most difficult part, say no to all the bullshit services and cards and other crap they try to upsell you on, all you need is a check book) 3. Invoice to the LLC, not yourself 4. Write checks from the LLC account to yourself when you want to get paid for however much you want to get paid 5. Make sure you're paying estimated quarterly taxes if you make enough to do so, you don't need to do this in your first year as a llc/contractor
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May 22, 2019 14:05
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DaveSauce posted:I don't know the ins and outs, but if you don't have a legal business entity set up, can you cash checks made out to said business entity? Checks made out to "Bob's Consulting" are not technically the same as checks made out to "Bob Smith." You and the company probably don't care, but the banks might pitch a fit.
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May 22, 2019 14:06
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Thanks guys, I'll try and give more details for clarification. Old employer is probably shutting down soon (business was drying up), so yeah, this is just me getting the final trickle of their projects done in my off hours. There's only 4 full-time employees and the work is highly specialized, so hiring/training a replacement would be far more trouble than it's worth at this point. The old company (and by extension, this arrangement) could conceivably last through the year or indefinitely, if more business comes through than expected. Either way I don't plan on taking this "business" on the road or anything. What my current boss suggested was a daily rate derived from my current salary (i.e., [X/52]/5 ), increased by 15%. So I'd bill the company for that amount on any day I do work for them. So it seems like a pretty favorable arrangement for me, especially on days where the work amounts to just an hour or two. From skimming various articles on Legal Zoom and such, it sounds like I could just be a sole proprietorship under my own name, and the only major formality would be reporting the income by April (or perhaps 4x/year like someone mentioned?). As I understand it, sole proprietorship doesn't really entail any setup process, it's just kind of what you are if you're billing somebody for your services. If it turns out the LLC thing makes sense I could go that route, but since I'm basically just continuing a relationship with my employer of 15 years, I'm not really concerned about any litigation. Also I want to reiterate that this might only last for 2 months, as the status of the old company remains up in the air. I've been on a health plan through my spouse's job this whole time so that's a non-issue. Other benefits will all go through my new full-time job. Thanks again goons!
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May 22, 2019 15:16
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Minidust posted:
Did you double check the numbers? Remember you're losing more than salary.... you're losing access to equipment, software, benefits, retirement, etc.... I know you said health insurance is taken care of, but there's a ton of other benefits that your employer provides that can be easily converted to a dollar figure. Don't forget that you are responsible for their half of FICA taxes now. 15% should more than cover it, but might not be enough once you consider everything else you lost.
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May 22, 2019 15:32
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Minidust posted:Thanks guys, I'll try and give more details for clarification. Old employer is probably shutting down soon (business was drying up), so yeah, this is just me getting the final trickle of their projects done in my off hours. There's only 4 full-time employees and the work is highly specialized, so hiring/training a replacement would be far more trouble than it's worth at this point. Get the LLC
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May 22, 2019 20:33
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Jack2142 posted:Get the LLC
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May 23, 2019 02:07
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It sounds like this is probably not the case but if you stand to make serious money at this it would be worthwhile to look into making an S-corp.
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May 23, 2019 13:31
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Is there any reason I couldn't start with a sole proprietorship and then just look into LLC/S-Corp/etc if it's still going on in six months or so?DaveSauce posted:Did you double check the numbers? Remember you're losing more than salary.... you're losing access to equipment, software, benefits, retirement, etc.... I know you said health insurance is taken care of, but there's a ton of other benefits that your employer provides that can be easily converted to a dollar figure.
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May 23, 2019 16:12
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Minidust posted:Is there any reason I couldn't start with a sole proprietorship and then just look into LLC/S-Corp/etc if it's still going on in six months or so?
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May 24, 2019 02:46
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Welp, so the boss got spooked after talking to his accountant and the plan is to just keep me as an employee with a custom schedule now. Same pricing arrangement, but handled through payroll so tax withholdings and all that will be taken care of. Sounds good to me; I'd prefer to have less to think about when starting the new job anyhow. Guess I'll be on payroll after all but thanks for the advice Goons!!
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May 24, 2019 18:23
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Does the new job allow you to be doing this old job work on the side? Are they similar industries, and would it be seen as threatening the skill, knowledge, attention, and even competitive business that the new employer would expect you to devote to them?
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May 25, 2019 17:03
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I wanted to chime in here and say I found some of the advice useful. I'm in a construction/custom fabrication related job and I've been thinking in general about the future of my career. I could move to another company, but there is also the chance that there may come a time when freelancing is actually a good option. Is there a thread anywhere about how to prepare into going freelance? IDK if I should clog up this thread with my unrelated questions, but I'd like get an idea of what I haven't thought of yet.
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Jul 28, 2019 04:25
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Fanged Lawn Wormy posted:I wanted to chime in here and say I found some of the advice useful. My advice is get Quickbooks or similar, and this book. Your local library has it and it will help make you ask a lot of those questions you don’t know you should be asking. How to Write a Business Plan https://www.amazon.com/dp/1413325459/ref=cm_sw_r_cp_api_i_FgCsDbD9KQMQ4
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Aug 6, 2019 19:07
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| # ? Apr 26, 2024 16:22 |
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SpelledBackwards posted:Does the new job allow you to be doing this old job work on the side? Are they similar industries, and would it be seen as threatening the skill, knowledge, attention, and even competitive business that the new employer would expect you to devote to them? Yeah it's cool, the two jobs are in completely different industries. One could not remotely be considered a "competitor" of the other, and I've been very deliberate about not doing "old job" tasks in the 9-5 hours. But that was a good point to bring up, thank you. 
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Aug 6, 2019 20:19
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