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LLC only protects for liability, S-corp is for tax advantages. Well worth it if you’re making over 100Kish on 1099s
It’s true larger agencies will try to W-2 you, but there are workarounds if they really want to work with you. Separately, I can confirm that smaller agencies or independents are willing to do 1099. S-corp status does give you tax optimization opportunities. I think it’s a matter of if you’re willing to do the admin stuff and stick with it for awhile to make it worth it.
You could also set up as an S-Corp. There are tax advantages with LLC or S-C as you can claim a lot more in terms of expenses come tax time. You should pay quarterly taxes for either.
Thanks for the responses. Very helpful.
I would start taking all the gigs you can get, see how it goes then assess if it makes sense to set up an entity like an LLC which will require you to get business insurance along with separate banking along with additional accounting/tax concerns. TLDR you could end up starting a freelance entity with all it entails and then never need it.
I freelanced a long time and used to kill 1099 with a business (LLC). Then everything started slowly going W2. I’m full time right now but the last few very good FL gigs I had were all W2, to do 1099 if they were even a year they had insane insurance requirements for cyber and E&O and all that that - when I bid it with my broker costs were like 20k a year. That was on top of professional liability, etc and workers comp which I already had. I went W2 as it made more financial sense.
What drives most large agencies into 1099 among other things is liability protection under their umbrella of employee coverage along with various state laws that make 1099 increasingly difficult. They would if they could.
It’s most important to start getting paying clients ASAP, build a reputation and repeat business and then adapt as you need to. If you get someone who wants or requires you to be an entity, you can set it all up in a matter of days, and then refine it with light professional help as you need it as you go. Good luck!
you can also just set up an EIN for free directly from IRS.
That doesn’t do anything unless you’re requesting an EIN for an LLC/s-corp.
It mostly depends on how long you’re planning on freelancing and how much you make doing it. If you’re making anything close to ACD money you should def consider it. Either way find a tax professional that’s worked with freelancers/contractors and book a consultation
You can do it yourself online for like $300-500 but it is a PIA. Just don’t take the bait on paying for agent service unless you’re lazy /don’t want to read mail pertaining to your LLC
Also you heard wrong-ish… Big agencies and staffing firms like CC tend to do W2s but small shops usually 1099s. There are a lot more small shops and the majority of gigs I’ve had have been 1099
what's the main driver to avoid w2?