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Hey Fishes,
Can anyone give me referral ?
Thanks!
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I was in this same boat very recently... was actually searching in this bowl to see if anyone had any related stories/advice and came across this!
Let me share my thoughts: you want to establish a legal entity for 2 reasons:
1 - tax efficiency - save $ in reducing self-employment tax
2 - liability protection - beware that simply establishing a Corp/pa/LLC/etc by itself is not alone - there are issues of
A) alter ego / piercing corporate veil
B) maintaining sufficient capitalization
C) in some jurisdictions a creditor may have the ability to collect directly from single-owner/member of the entity with a judgment against it
My advice:
1) Have an attorney review your contract before signing and help with negotiating and language into it
2) build in language so that your client is required to indemnify you for any liability arising for work performed within scope of the agreement
3) get insurance from an agent/company familiar with your line of work (camico and Hanover were my top two and make sure you read and fully understand your coverage, confirm with them the scope of your agreement is covered
4) make sure you maintain necessary corporate formalities
5) in some states, llcs have a lower burden of formalities necessary to maintain liability protection for its members, but at the trade off of a higher annual fee and often do not actually protect single member/owners. Read up on this.
6) lastly, certain types of professional services are regulated by state. For example, I am a CPA and in Florida because my work was offering financial-type services, even though I wasn’t certifying financials, auditing or tax work, according to the statutes I thought it was best to: A) form a Professional Association (equivalent of a corporation for certain types of professionals) and
to B) also obtain a CPA Firm license for my PA since my work was financial in nature (consulting, not audit, tax, not certifying financials).
Hope this helps! Interested in hearing other people’s’ thoughts/comments/questions. This is an area that is insufficiently understood by most. Happy to help you in any way I can.
I've been presented with a similar offer, 6 month contract role at Deloitte(potentialto convert at the end), higher pay and better opportunity than my current full time role. Yes it is a bit risky considering what will happen after 6 months is unknown. But it provides the opportunity to work in a different environment, remote from anywhere which is important to me at this point in my life and with a solid company.
So I've considered things like medical, covered by my spouse's plan, 401k provided by the contract co., and plan on networking during that time, to open opportunities for a full time role at the end of the 6 months engagement.
S
Thank you for sharing! It’s good to know others are in the same boat.
Just curious why you want to leave a full time job for a 6 month contract?
I have reached a plateau at my current organization and am looking for a change to grow and develop outside of my geographic area. It’s definitely the riskier option out of my choices, however my current position outpaces my yoe and it was hard to get interviews. I’m looking at this as a way to leverage and build experience outside of my niche area to expand my options.
For starters I agree with CKC1 on having your contract reviewed and beefing up the indemnity, limitation of liability as well as insurance. You're going to want to negotiate favourable wording for you as they are they business and have the legal framework and insurance policies to cushion the blow if they were to get pushback from a client.
With regards to forming a LLC for saving on taxes i'd recommend incorporating a offshore company in a tax haven in a country that's most favourable to you.
You could go ahead and get your own insurance if you wanted but I wouldn't recommend it as:
A. You should be able to negotiate out of it in your contract.
B. Professional indemnity insurance very expensive and the policy usually only kicks in when there is a judgement against you, until then you'll need to foot the bill.
C. The forming of a foreign company to enter into the contract will give you significant level of protection when it comes to law suits from third party clients and even from the company.