The Start Up Blog

The Independent Contractor

How to Survive the Transition from Employee to Independent Contractor

Independent ContractorSo you’ve made the decision to become an independent contractor. If you’re like the millions of other company employees in America making this decision, you’ll probably have a few questions about what to do next because, let’s face it, owning your own business is exhilarating, but it can also be intimidating.

On the one hand, you have flexible hours, no boss, and casual dress. On the other hand, you encounter a whole new realm of responsibilities involving taxes, liabilities, establishing credibility, etc. What can you do to help lift the burden of these accountabilities? Incorporate your business.

Incorporating your business instantly adds credibility to your company. By adding three letters to the end of your company name, you make it clear to the consumer that your company is legitimate and well established. If the consumer takes you seriously, you will have already taken a large step towards winning a client. Still not convinced? Think of the personal financial benefits.

Protecting your assetsThe corporation provides a protective wall that will shield your personal assets if the business becomes a target of lawsuits related to company activities. This means that your home, cash, retirement savings, and other assets cannot be confiscated to satisfy a legal judgment against the corporation.

Speaking of homes, did you know that, by operating an incorporated business out of your personal residence, you could reduce your taxes? This “Home Office” arrangement can create valuable business deductions that will significantly reduce the amount of income taxes that are payable to the Federal and Local government at the end of the year. In addition, you become eligible for tax deductions aimed at health insurance, telephone, travel, entertainment, and other necessary expenses that help reduce the company’s tax bill.

On an even more personal note, if you work for a small number of clients, the corporation could help prevent you from being counted as a company employee for income tax purposes. This is important because your clients are not generally obligated to withhold the income and FICA taxes that are applied to employee wages.

Finally, your business insurance and liability costs will be reduced. If your personal assets are protected from your company’s lawsuits, you have fewer assets to insure and fewer premiums to pay. Why not cut costs if you can?

Essentially, if you’re interested in saving money and establishing a credible name for your company, incorporation is for you.

If you are an independent contractor interested in incorporating, utilizing an incorporation firm such as Inc. Plan (USA) can save you from steep legal fees and give you peace of mind that your company will be incorporated quickly and correctly.

View the main Inc. Plan (USA) site here:

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Entrepreneur Jeff 26-03-2012, 13:19

If I may add, it is also necessary for someone who transitions from being an employee to being an entrepreneur to adapt the entrepreneur’s mindset.

Work and Business are two different entities – separated like north pole and south pole.

Kelvin Nyswonger 11-12-2012, 05:57

These are truly great ideas in about blogging. You have touched some nice factors here. Any way keep up wrinting.|


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