On Jan 26, 10:13 am, "Andrew Karp, Sierra Information Services" <sfbay0...@aol.com> wrote: > In a nutshell , "being paid on a W-2" means you have an employee/ > employer relationship with the entity that is paying you. If a > recruiter says "I will pay you on a W-2," that means you become an > employee of the recruitery (or the client itself) for the duration of > the contract. The employer pays your share of social security taxes > and withholds taxes from your paycheck, etc. As a "W-2 employee" you > MAY be eligible for health insurance and other benefits offered by th > employer to its employees, as well as unemployment compensation at the > end of the contract. > > If you are "paid on a 1099" you are an independent contractor, and > responsible for paying both the employee and employer share of social > security taxes. You may also be required to purchase your own > liability and errors/ommissions insurance. > > You don't have to "form a corporation" to be paid "on a 1099 basis," > BUT some clients want to see evidence that you are in fact an > independent business, and forming a corporation is one way to do > that. Lots of miscellaneous income is reported on 1099s, such as > honoraria for speaking at a meeting, payments to review a book for a > publisher, or short term work assignments. If you have kids, and a > babysitter whom you pay more than (I think) $600 a year, you have to > give her a 1099 documenting what you've paid her. The babysitter does > not need to "form a corporation." > > BUT, setting up a corporation can be time consuming and expensive, > depending on what state you live in (here in the USA). One important > reason why people incorporate when they set up a new business is to > create the "corporate veil" between their personal assets and their > business assets. If there is litigation over some issue, one of the > first things the other side is going to do is attempt to "pierce the > corporate veil" and try to come after your personal assets. For > example, that happened to a friend of mine who is a dentist who formed > a small corproation for his practice that included two or three other > dentists. When one of other dentists sued the remaining owners (I > can't recall the details of the suit now), the first thing the > plaintiff did was attack the legal basis of the corporation in an > attempt to expose the personal assets of the defendants. Among other > "attacks" was that the "corporation" was formed using an online tool, > was incoporation in Delaware even though all business was done in > California, etc. > > In the SAS programming world, some pharmas (and other companies) will > only bring short-term workers in to their organizations if they are > "W2 employees" of a larger placement/recruitment firm. This > arrangements, while often difficult for the programmer, give the > employer a certain level of legal protection against claims that > "contractors" were really "employees," etc. If the recruiter offers > you the "payment on a 1099" option you will most likely have to > provide proof to the recruiter, and the client, that you have > liability and/or errors and omissions insurance, which can be > expensive to obtain. > > In the past, I've mentioned my strong feeling that it makes no sense > "to incorporate" to become a SAS Software contractor doing on-site > work for clients, especially if you anticipate having just one or two > short term jobs. It isn't worth it. I think it would make more sense > to do a W2 arrangement with the recruiting firm. While you may be > paid less per hour, your taxes are being paid and many of the > unpleasant bits of independent contracting (e.g., payroll, making tax > payments, etc) are handled by others. And, there is a chance you can > get health insurance, paid vacations, sick leave, etc while you are > "on a W2" with the client. In the long term, I do not think there is > any financial benefit to going through the steps to incoporate for the > purpose of a short term contract as a SAS programmer for a pharma > company. > > I hope this information is of use to you. > > Thanks, > > Andrew > > Andrew Karp > Sierra Information Serviceswww.SierraInformation.com > > On Jan 26, 5:36 am, John Uebersax <jsueber...@gmail.com> wrote: > > > > > Recruiters often ask me, "do you want to work on a W2 or a 1099 > > basis?" > > > Can someone help me understand what is required to work on a 1099 > > basis? > > > 1. Must I take legal steps to form a corporation? > > 2. Or can I simply operate as a sole-proprietorship? > > 3. I mainly work in the pharma area. Will companies do business with > > me directly as a contractor if I am not incorporated? > > > 4. Or perhaps it might be better to ask the question in an open-ended > > way: what steps are required to contract directly with a pharma > > company? > > > If there's a better discussion group in which to ask these questions, > > please let me know (although I suppose there are many other people > > here who are intestested in this topic). > > > Thanks in advance > > > John Uebersax- Hide quoted text - > > - Show quoted text -

Andrew,

I agree on parts and disagree on parts.

Incorporating is cheap and easy:

http://www.ailcorp.com/?AID=10361936&PID=1787085&SID=USMD11789

It is worth it for lots of reasons but one major one (that pays for it essentially) is the Solo 401K.

Talk to your accountant but ABSOLUTELY consider a 1099 and incorporation. The Solo 401K is manna from heaven and is well worth the price of the incorporation.

A lot of clients now will not even consider a W2 (I am suprised you are being offered it). I am asked for my tax id on every single engagement now.

Alan Savian