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Re: [Maybe OT] . . .the Contracting Business
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| Ron Wingfield 2005-02-23, 3:56 am |
| Hello James,
I've contracted for about twenty-five years. From experience, here's a few tips:
Incorporate your business. You'll gain protection under the corporate veil.
Elect Sub-chapter S. (Essentially, you'll pay only personal income taxe, and not corporate taxes.
Always contract for 1099 payment -- Never, never W2!
Also, there are essentially twenty to twenty-one criteria for independent contractor status. (I Googled around and found this link: http://www.hasys.com/systems/20_factors.pdf ).
Be aware that the contracting business is not what it used to be. With out-sourcing and off-shoring, it's tough to compete with someone making $10/day when you used to get $75 to $125/hr or more (keep in mind that China's not a major player, . . .yet). Also, the technology has changed or evolved to the point that no one, NO ONE, can know it all. RFP's or job orders can be so specific that the odds of a match are abysmal. More likely than not, and especially with government contracts, the client usually has someone or some company already in mind, but the contracting agency is required by law to publish an RFP (. . .all that Equal Opportunity stuff, etc.); therefore, they write the RFP to be so exclusively specific that the odds of another responding party meeting all of the requirements are a zillion to one.
Adding insult to injury of this scenario, many companies are so gun-shy of IRS consequence, that they will not contract directly with a single independent contractor; rather, they contract with staffing or accounting firms that are notoriously overpriced for the skill levels of indivudual that they provide. If for example, you work with a company like Accenture (formerly Authur Anderson), you'll get paid a fraction of what they bill you out for, and probably, they're going to only hire you as a W2 employee, anyway. I have worked with a few small job brokers, but beware! There are only two or three that I respect and will still do business with, and also the business has become much more difficult for them, too.
Finally, the perceived value of the work done is devalued. Programming in the traditional or former sense (as in two decades ago) is now considered no more than a clerical task. The market for programming skills, (the so-called wave of the future, . . .I never liked that term, anyway) has been glutted by trade school wonders that have no concept of how business is conducted (don't believe me, . . .ask an eighteen-month "graduate" to write a five page abstract on the nuances of MRPII, the ramifications of Just-in-Time Inventory with emphasis on Raw Materials in considerations for the Rolling Mill Production Schedule of a hot rolled steel mini-mill, all of which are blanked under an Enterprise System that included Human Resources, Payroll, and General Plant Accounting.)
Finally, the web and advent of HTML, et. al., has created an opportunity for art students and marketing grads. to get into the mix. This is why so many web sites are such a pain in the !#$% to visit. Too much information, . . .too much time to load, . . .too annoying. Given the plethora of html page editors, etc., web design has become more of a cosmetic thing -- it's certainly not programming. (Arguably, server-side code and to some extent, client-side Java Script require some programming and organizational skills.)
As for server and network administration, again, the technology is analogous to no more than typewriter repair skills of the pre computer era. After all, personal computers, etc. and now considered to be disposable Consumer Electronics by the industry.
Bummer, huh?
Seriously, good luck,
Ron Wingfield
--------------------------------------------------------------------------------
----- Original Message -----
From: James W. Thompson, II
To: beginners@perl.org
Sent: Monday, February 21, 2005 7:49 PM
Subject: [Maybe OT]
This isn't a technical question and I know no one here can/should
probably dispense legal advice; but does anyone know of some good
resources (other than talking to a lawyer) regarding freelance
programming/consulting contracts?
--
James W. Thompson, II (New Orleans, LA)
--
To unsubscribe, e-mail: beginners-unsubscribe@perl.org
For additional commands, e-mail: beginners-help@perl.org
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| |
| Todd W 2005-02-23, 8:56 pm |
|
"Ron Wingfield" <rtwingfield@archaxis.net> wrote in message
news:003901c51902$61ea4820$4a688a42@DTC...
<snip />
> Always contract for 1099 payment -- Never, never W2!
Can I ask why? I landed some telecommuting work I've been doing for about a
month now and the proprietor wants to move me to a W2...
Thanks,
Todd
| |
| Ron Wingfield 2005-02-24, 3:56 am |
| Hi Todd,
.. . .Because anyone working as a W2 employee is NOT a contractor! A W2 employee is just that, an employee. Among other things, the IRS can look (as in an audit) at any W2 work performed in the past or future, if it is similar to or otherwise intertwined with other 1099 services that you may or will provide in the future, and use it as a precedent to disallow other 1099 work.
Think of it this way. Your client probably does not hire W2 employees to repaint the office walls, or replace the carpet in their building. Tell your client that you are a contractor, period. Tell the cllient that you have other clients and cannot commit to W2 employment. Again, take another look at the guidelines at this link: http://www.hasys.com/systems/20_factors.pdf .
Also consider this: if the client wants to employee you as a W2 employee, then they should pay FICA/FUTA withholdings, workman's comp, other insurance and benefits (ask about their dental and vacation plans).
Actually, Todd, my wife is a tax attorney, and does a lot of corporate work. If you'd like some additional clarification, email me back and I'll ask her to remind me of some more examples.
Remember, like I mentioned before, your situation is another example of the corporation not wanting to contract with an individual. On the other hand, . . .would becoming a full-time employee of your client be something that appeals to you?
OTTF,
Ron W.
----- Original Message -----
From: Todd W
To: beginners@perl.org
Sent: Wednesday, February 23, 2005 5:29 PM
Subject: Re: [Maybe OT] . . .the Contracting Business
"Ron Wingfield" <rtwingfield@archaxis.net> wrote in message
news:003901c51902$61ea4820$4a688a42@DTC...
<snip />
> Always contract for 1099 payment -- Never, never W2!
Can I ask why? I landed some telecommuting work I've been doing for about a
month now and the proprietor wants to move me to a W2...
Thanks,
Todd
--
To unsubscribe, e-mail: beginners-unsubscribe@perl.org
For additional commands, e-mail: beginners-help@perl.org
<http://learn.perl.org/> <http://learn.perl.org/first-response>
| |
| Kurt Cagle 2005-02-24, 3:56 am |
| James,
If I can add my two cents worth here as well ...
I have similarly been contracting for about twenty five years, and I
will second everything that Ron wrote. Incorporate as an s-chapter
corporation - if you go in as a sole proprieter, you're personally
liable for all debts incurred, still have to pay self-employment tax,
and generally have almost no protection under the law if your business
faces bad economic times (I speak from experience here). Make sure that
you have about a six month pad in the bank (I'd even recommend a
year's worth if you can manage it) because you WILL dip into that pretty
quickly as you're establishing yourself. Far too many consultancies have
failed because, even though people may have the contracts, the money is
very slow in coming in.
Keep in mind as well that your operational expenses will also include
health insurance costs, a necessary expense even if its becoming
increasingly unaffordable. If you get sick or injured, you are not
bringing in income, and having to pay out of pocket for anything
sufficiently severe that it keeps you from working will likely wipe out
what little pad you do have..
If you do manage to establish yourself as an independent vendor with a
large company (a much more difficult task today than yesterday), expect
that it will be a minimum of three months before you see any money, as
it usually takes at least that long for vendors to be vetted and entered
into the system. For government contracts, add another three months to
that. As a contractor, the game almost invariably favors the hiring
company, and in recent years, this has becomee even worse. Large
software companies such as Microsoft not only seldom hire independent
contractors anymore, they typically only use only one or two large
body-shops to bring in people, and unless you are exceptionally well
known in your field, you will almost invariably end up being brought in
by such companies ONLY under contract. Microsoft in particular (again
from experience) has been slapped down a couple of times for keeping
their hires as contractors for years, but that doesn't mean that they
don't still do it or that other companies don't do it as well.
I'm a writer (you want to talk about a nice "secure" job!!?)
specializing in computer trade books - and writing is probably one of
the few professions where you can still be an independent, though the
money is nowhere near as good as you can make even as a contractor, 
to say.
My recommendation, as awful as it may be - if you only have a couple of
years under your belt, put up with the contract mills for a while, even
if they are vampiric leaches. Get the experience and the resume. Start
writing for publication - a few good technical articles under your belt
and maybe even a computer book or two can be a useful business card.
Read the fine print of your contracts closely, and choose jobs that
don't restrict you from taking moonlight contracts. Start building up a
client base through these -- happy customers refer other happy
customers, and tend to grow as you do. Be careful to keep a chinese wall
between your contracting service clients and your own - don't use code
from one for the other, don't put yourself into a situation where your
contracted employer can turn around and sue you.
Finally, only half in jest, don't go into consulting if you're married,
unless your wife is making enough to offset any slow periods on your
part and is willing to make the sacrifices to keep the family going in
lean times. Consulting is a feast or famine situation - you will either
be busier than you can handle or you will be slower than you can
survive; besides the uncertainty in income, the constant stress of
either you not being available at critical times or you being too
available at non-critical times will doom most marriages except the
strongest.
As with any profession, most people who have established themselves in
the field will tell those that haven't that its not worth it, so always
take things like this with a grain of salt. The benefits of having your
own business can't be beat either - you choose your hours (though you
will put in more than most "full-timers"), you generally profit from
your own work rather than getting the final sliver of a body-shop's
fees, you can make the decisions for good or bad rather than being at
the beck and call of a boss. For some people, this is worth the long
hours, the periodic famines, the regulatory headaches.
-- Kurt Cagle
Ron Wingfield wrote:
>Hello James,
>
>I've contracted for about twenty-five years. From experience, here's a few tips:
>
>Incorporate your business. You'll gain protection under the corporate veil.
>Elect Sub-chapter S. (Essentially, you'll pay only personal income taxe, and not corporate taxes.
>Always contract for 1099 payment -- Never, never W2!
>
>Also, there are essentially twenty to twenty-one criteria for independent contractor status. (I Googled around and found this link: http://www.hasys.com/systems/20_factors.pdf ).
>
>Be aware that the contracting business is not what it used to be. With out-sourcing and off-shoring, it's tough to compete with someone making $10/day when you used to get $75 to $125/hr or more (keep in mind that China's not a major player, . . .yet).
Also, the technology has changed or evolved to the point that no one, NO ONE, can know it all. RFP's or job orders can be so specific that the odds of a match are abysmal. More likely than not, and especially with government contracts, the client usual
ly has someone or some company already in mind, but the contracting agency is required by law to publish an RFP (. . .all that Equal Opportunity stuff, etc.); therefore, they write the RFP to be so exclusively specific that the odds of another responding
party meeting all of the requirements are a zillion to one.
>
>Adding insult to injury of this scenario, many companies are so gun-shy of IRS consequence, that they will not contract directly with a single independent contractor; rather, they contract with staffing or accounting firms that are notoriously overpriced
for the skill levels of indivudual that they provide. If for example, you work with a company like Accenture (formerly Authur Anderson), you'll get paid a fraction of what they bill you out for, and probably, they're going to only hire you as a W2 emplo
yee, anyway. I have worked with a few small job brokers, but beware! There are only two or three that I respect and will still do business with, and also the business has become much more difficult for them, too.
>
>Finally, the perceived value of the work done is devalued. Programming in the traditional or former sense (as in two decades ago) is now considered no more than a clerical task. The market for programming skills, (the so-called wave of the future, . .
.I never liked that term, anyway) has been glutted by trade school wonders that have no concept of how business is conducted (don't believe me, . . .ask an eighteen-month "graduate" to write a five page abstract on the nuances of MRPII, the ramifications
of Just-in-Time Inventory with emphasis on Raw Materials in considerations for the Rolling Mill Production Schedule of a hot rolled steel mini-mill, all of which are blanked under an Enterprise System that included Human Resources, Payroll, and General Pl
ant Accounting.)
>
>Finally, the web and advent of HTML, et. al., has created an opportunity for art students and marketing grads. to get into the mix. This is why so many web sites are such a pain in the !#$% to visit. Too much information, . . .too much time to load, .
. .too annoying. Given the plethora of html page editors, etc., web design has become more of a cosmetic thing -- it's certainly not programming. (Arguably, server-side code and to some extent, client-side Java Script require some programming and organi
zational skills.)
>
>As for server and network administration, again, the technology is analogous to no more than typewriter repair skills of the pre computer era. After all, personal computers, etc. and now considered to be disposable Consumer Electronics by the industry.
>
>Bummer, huh?
>Seriously, good luck,
>
>Ron Wingfield
>
>--------------------------------------------------------------------------------
>
>
> ----- Original Message -----
> From: James W. Thompson, II
> To: beginners@perl.org
> Sent: Monday, February 21, 2005 7:49 PM
> Subject: [Maybe OT]
>
>
> This isn't a technical question and I know no one here can/should
> probably dispense legal advice; but does anyone know of some good
> resources (other than talking to a lawyer) regarding freelance
> programming/consulting contracts?
>
> --
> James W. Thompson, II (New Orleans, LA)
>
> --
> To unsubscribe, e-mail: beginners-unsubscribe@perl.org
> For additional commands, e-mail: beginners-help@perl.org
> <http://learn.perl.org/> <http://learn.perl.org/first-response>
>
>
>
>
>
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