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1099 consultant

Raj Ohadi
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Joined: Jun 30, 2006
Posts: 316
Many consulting firms say they can do either W-2 or 1099 with new hires (of course I am talking about USA). I am wondering if I do 1099, do I have to register and set up a S-corp or whatever company first ?
Henry Wong
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Joined: Sep 28, 2004
Posts: 18847
    
  40

Originally posted by Raj Ohadi:
Many consulting firms say they can do either W-2 or 1099 with new hires (of course I am talking about USA). I am wondering if I do 1099, do I have to register and set up a S-corp or whatever company first ?


No. You don't need a C-corp, S-corp, LLC, etc., to have a 1099. However, there are some extra tax advantages to do so -- it is easier to deduct certain expenses. Regardless, I suggest you get a good accountant for this.

Furthermore, you will also start off with a disadvantage. For 1099, you will be paying both sides of the FICA, whereas with a W2, you will only be paying your half. Again, you need to consult your accountant about this.

Henry
[ June 07, 2008: Message edited by: Henry Wong ]

Books: Java Threads, 3rd Edition, Jini in a Nutshell, and Java Gems (contributor)
Doug Slattery
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Joined: Sep 15, 2007
Posts: 294
Hi Raj,

Just to elaborate a little more on Henry's post.

You can be 1099 status as a sole proprietor. That's how I've handled my entrepreneurial ventures over the years. This has tax advantages over a corporation where you're only liable for your part of FICA. You don't have to pay social security or medicare taxes. Depending on what state you are in, you may have to pay sales tax though. Where I am, I have to pay sales tax, but it's pass through because I can charge my customers the tax.

Some contract positions are corp to corp. In that case, you would have to incorporate.

Hope that helps...
Aloha,
Doug

-- Nothing is impossible if I'mPossible
Raj Ohadi
Ranch Hand

Joined: Jun 30, 2006
Posts: 316
Thanks for the response fellows. I heard that if you set up a S-corp then you will have to file your company's earning or other stuff quarterly, is that true ? And if you have no employee but yourself, it could be a problem, any opinion on that ?
Mark Herschberg
Sheriff

Joined: Dec 04, 2000
Posts: 6037
Originally posted by Raj Ohadi:
Thanks for the response fellows. I heard that if you set up a S-corp then you will have to file your company's earning or other stuff quarterly, is that true ? And if you have no employee but yourself, it could be a problem, any opinion on that ?


Note: IANAL, er IANAC... I am not an accountant

If you are any type of corporation you need to file taxes and possibly other documentation.

As for "problems," I'm not sure what you mean. To the best of my knowledge there are no extra legal requirements for sole proprietorships. It could be problematic in that you don't have an accountant on staff, so you either have to do it yourself or hire outside help. What type of problems are you worried about?

--Mark
 
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