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Topic: Self-Employed vs. Entity?
| Author | Message |
| cswriter | Posted – 4/16/2007 12:43:59 AM | show profile | email poster How does one decide if it makes more sense to be self-employed (and responsible for your health insurance) or an entity, such as an LLC or other type of corporation (and have to get an EIN? ID number and pay taxes no matter what the business earns or not)? I was just offered to try some part-time work (unrelated to the field) but need to sign a contract up front. Even if I don't follow through with this, I'm thinking that in the future I will need to establish one or the other. |
| queenswriter | Posted – 4/16/2007 3:05:01 PM | show profile | email poster I think you are a bit confused If you are a full-time freelancer, you are self-employed, and therefore responsible for your own health insurance, retirement, budgeting for taxes, including self-employment taxes. You don't need to do anything special for any of that except quit your FT job and find a good accountant. At that time you are considered a sole proprietor. However, once you start making some dough (say $50-75k+/year) you might want to consider incorporating, which would include getting an EIN. Again, your accountant can help you decide which is best for you, and whether this is a good move for you at that time. But having an EIN makes no difference as to whether you buy your own health insurance. I did this through an online service this year and it cost me about $650. You can always have a FT job and freelance on the side, in which case your taxes would be more complicated, but presumably you could keep your employer's health insurance. |
| cswriter | Posted – 4/16/2007 4:56:25 PM | show profile | email poster I'm wondering if I can be self-employed under another name, or if I would have to become incorporated (or something) in order to keep everything separate from my personal account. |
| Lula | Posted – 4/17/2007 9:25:43 PM | show profile Unless you establish a legal entity?a partnership, an LLC or a corporation?you are personally liable for all business expenses. That means that if your business incurs debt, you are personally responsible for making sure it gets paid back (among other things). To do business under a name other than your own, you need to file a dba (doing business as), generally with your city or county. In California, you also need to file a fictitious business name, which basically involves publishing an announcement in your local paper. I second the recommendation to find a good accountant. I also recommend you open a separate bank account for your business income/expenses to help keep it separate and straightforward. Some banks may require the dba to open an account under a business name other than your own. |
