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Comment by chasing | Hacker News Reader

Just create a company for yourself.

When that sort of situation arose for me, it seemed mostly just that companies I wanted to work with weren't really set up to handle individual freelancers. They weren't trying to scam me or let their buddies skim off the top. So, I made an S-Corp. Haven't had a problem since.

Also makes it easier to do stuff like get project insurance, which some clients have also required. It's not expensive or time-consuming, you just have to jump through the hoops the bureaucracy wants you to jump through sometimes. And if that makes you uncomfortable, then you don't have to go after or take those kinds of gigs.

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Went the LLC route, got professional insurance (megabux of insurance is actually not that expensive), those two tick most of the boxes for most potential clients. Individual experiences will vary of course, and there are totally folks out there who want to kick their friend's middleman business everything they can.

Same here, single person LLC awhile back.

The big advantage of this route is you have much wider discretion to define your salary, business expenses, what you can claim on taxes, etc. It was really eye opening to me what the accounting possibilities are.

The downside is you need an accountant (or be very good at it yourself), and of course you need steady clients.

Indeed. Scubabear the employee is still limited to the same 401(k) contribution limits as everyone else, but Scubabear the employer LLC can have some very generous employer contributions for all of their employees (which happens to be just the one).

It’s so annoying that that sort of thing isn’t available to everyone. Similar for mega back door Roth IRA. Which my partners work supports but mine doesn’t. Iirc being able to back door or not was something like 175k dollars over 30 years.

Hey, can you share any resources for learning this stuff? I've started to play around in these waters, meeting with an accountant next week, but I'd like to get semi-ok at it myself. Any books or resources would be appreciated.

I learned it all online from various sources, and confirmed with an accountant. Start by Googling “single proprietor llc tax advantages”, and go down the rabbit hole of sole proprietorship vs single person LLC vs S-Corp.

From memory S-corps are a little involved to setup, but have some unique advantages. Single person LLC’s are dead simple to setup. In my State, NJ, it was simply getting an EIN from the IRS website, doing a name search for a unique enough name, and then registering the LLC with the State for a small fee.

Unlike a salary, when you do “Corp to Corp” and someone pays your LLC, it is up to you what to do with that money and how to account for it. That is where the tax advantages can be big. But be sure to talk to that accountant and get your tax payments in order.

Same here. When I finally did incorporate, I did use a local lawyer who does everything for $300 and walked out with my documents and EIN. Took about an hour. Said lawyer also allows use of their office address as the official contact and weeds out spam/scam official-looking letters.

I do my own accounting, it's not exceedingly difficult if you use e.g. TurboTax, but it does take time that you won't be billing for. If you don't use an actual accountant, you probably want to be pretty conservative with writeoffs, deductions, etc. I have a lot of physical inventory and hard purchases, so that makes it more straightforward.

Do be aware that all the stuff about having a corporate veil to protect you is basically nonsense when you're one person with a corporate entity. I know folks who thought that was protecting them, didn't have professional insurance "because if they sue the company it won't come down on me," and found out that yeah, that's a super easy veil to pierce.

>got professional insurance

Can you recommend some companies that do this?

Edit: Oh wow, I just made an online quote and it comes down to about $500/year. Dirt cheap for having peace of mind.

Check the policy terms.

Definitely this. I went through a local insurance agency. I'd had experience with them when getting commercial insurance on one of my trucks (box truck used for transporting equipment to and from customer sites) and had a very positive experience in dealing with them.

Do be weary, many insurance folks are individuals who decided they were going to sell insurance, took some minimal training, and are basically involved in "insurance" pyramid schemes like selling annuities. Source: family doing that stuff

The "have a company" route isn't necessarily a magic bullet if you're not working with multiple clients.

One of our clients (a Fortune 1000 company) had a program to weed out mis-classified contractors (individuals who really should have been employees). They demanded proof our LLC wasn't just contracting with them. It wasn't a problem for us, fortunately, but the one-man shop w/ a single client might not have fared as well. (It's also unclear to me why somebody would do that, but that's another topic...)

This. I run a sole proprietorship LLC for platform engineering consulting services.

I’ve had CA companies give me a hard “no” until they learned I was incorporated in AZ, living in AZ, and that a majority of the work would be performed remotely from AZ.

As I understand it (second hand from these companies) they open themselves up to liability under California labor law if it’s later determined that contracting/consulting work was “misclassified” and “should have been employment.”

I don’t personally know the reason for this, or what the liability is, but it seems like some companies are worried about having consultants/contractors later reclassified as employees. Me being in AZ has been the turning point for closing contracts though.

This kind of law exists because companies coerce people into becoming "freelancers", so the company doesn't have to pay benefits and can fire them at will, but then ask the "freelancer" to come to the office everyday, clock in and out in time, wear a badge, work 40h week, etc.

So lawmakers crack down on that, but law is a blunt instrument, and other valid situations can get more complicated.

But believe me, those laws are created 100% because companies abuse the concept of contractor.

I believe you.

I don’t have a stake in it. I’m not in CA and it doesn’t appear to impact me doing business with CA companies.

I imagine it’s a bummer for anyone trying to make their own way on their own terms in that state though. It might just be an unintended consequence, or maybe it doesn’t impact CA sole-proprietorships at all if they know the magic words to say or the right contracts to provide. Or perhaps it’s not as big of a deal as it sounded when they told me.

Just sharing my experience and saying I’m glad I live in AZ based on my limited knowledge.

The liability is that it’s tax fraud. https://www.businessnewsdaily.com/770-contract-vs-employees-...

The 1099-NEC form you receive instead of a W-2 for contractor income even has instructions for how to report your employer to the IRS if you think you've been misclassified as a contractor instead of an employee. I'm sure the IRS carefully investigates all such reports to secure every single penny Uncle Sam is owed in back taxes and penalties.

> It's also unclear to me why somebody would do that,

Because if you "contract" someone and they are later found to not qualify as that you can be forced to retroactively treat them as employees (e.g. pay their health/social insurance, fix your tax reporting about them, ...), it might be counted as tax evasion, ... Details about what exactly the rules are that need to be met vary by jurisdiction obviously.

I meant: Why would someone run a contacting company for one customer? That sounds precarious and silly to me. Having a diversity of customers always made sense to me.

From what I've seen: Acquiring new customers can be hard, and if someone is willing to pay for you full-time it's the easy path to just do that and kind of forget about adding on other projects (and the effort of balancing them etc)

That gives me the willies, personally. Given that contractors have no employee protections (such as they are) it’s even more troubling.

I started contracting because I saw it as a way to get some security. With a job I was effectively a business with a single Customer. Losing that relationship meant losing all my income (and health insurance). One fickle manager or business downturn and I might be in a world of trouble.

Having multiple Customers meant that I could screw up, survive a bad manager, lose a Customer’s downturn, etc, and not be scrambling.

How was this proof to be supplied? It sounds as if this is just a thinly veiled attempt to get your client list. That's confidential information and would have been a hard no from me.

We provided a form K-1 showing substantial revenue beyond our billings to them. I didn’t like disclosing our revenue but we didn’t disclose any client details.

It is not a silver bullet. Most big companies (the ones with the big budgets) will not want to onboard a new supplier if they can avoid it.

Though clients tend to overestimate it, it takes a lot of time, legals, resources etc to get a company successfully onboarded.

And (in response to the OP) in the unlikely circumstance that you do, 9 times out of 10 you will be signing their paperwork apart from minor redlines.

Indeed, I contracted with a company that wanted me to get some insane professional liability insurance, which would have cost a huge chunk of what they were willing to pay me. I told them sure, but I'd have to charge more due to the increased overhead, and then they relented. Point is it could have gone the other way, where they just said thanks but no thanks.

Then it did in fact take a long time to get onboarded, to the point where I didn't even have repo access for half of the contract. The experience wasn't great, and I doubt this company will do the same again.

In the US, usually most established companies want a $1 million pro liability insurance policy, which should only cost a few hundred dollars a year (certainly we’ll under $1k).

Startups..vary quite a bit.

My experience with business customers is that they often have lots of tedious requirements for vendors that disappear as soon as you tell them that they cost 2000€.

Same. I have a personal S-Corp and haven't ever had an issue.

Yes, this is the logical next step.

Yes insurance.

You might need to present some kind of documentation about risk management and security policy. But not always.

Some orgs will balk at bringing a new supplier on, but if you’re dealing with a capable operator they’ll find a way to get it done (ie tick right boxes without getting actual procurement involved)

Good luck, it’s worth it!

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