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  1. #1
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    Nov 2003
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    Question considering first contract - suggestions?

    I'd like to pursue db dev contract work for a while, but I've always worked as a full time employee.

    The only suggestions I've been given so far are:
    1) you want to become incorporated in case of lawsuits, and
    2) you will be taxed/withheld at a much higher rate.

    This info may be completely erroneous. The incorporation sounds logical, though.

    Anyone got any suggestions about what I need to do or watch out for?

  2. #2
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    While it will cost a bit up front, get a good lawyer and a good CPA from the area in which you plan to practice before you start. Spend some time (and probably a few hundred dollars) up front, which will save you many hours and thousands of dollars afterwards.

    -PatP
    In theory, theory and practice are identical. In practice, theory and practice are unrelated.

  3. #3
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    Nov 2003
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    Talking

    Thanks, Pat. I figured that the whole incorporation process would probably cost around $500 or so, but I'm a firm believer in paying up front to prevent getting hit down the road. On the bright side, at least I get to pick a nerdy name for my corporation. And even a motto, like "The future begins tomorrow."

    Wait, companies hiring contractors won't be able to see what I post here, right?

  4. #4
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    1. If you are a director of the corporation, you may be held personally liable, or you may be sued both personally and corporately (the deep pocket theory.)
    2. This may depend upon how you pay yourself: salary, management fee, or dividend.
    If you are incorporated, you may find credit difficult to get without signing a personal guarantee.

  5. #5
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    Nov 2003
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    Thanks, kitaman. Now I'm thinking I should pay a little more to the lawyer for some consultation. I never knew going contract would be so much more complicated than full-time.

  6. #6
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    Contracting (and generally running your own business) is more complicated, but it is also more rewarding (both professionally and economically). It is a big step, but for around half of the folks that try it, it becomes the only acceptable answer... You work more, and work harder, but the rewards are definitely worth it.

    One additional thought to consider that ought to be raised by both your lawyer and your CPA, but choosing WHERE to incorporate can be just as important as when and how. Different states/locales within the US offer radically different corporate playing fields.

    -PatP
    In theory, theory and practice are identical. In practice, theory and practice are unrelated.

  7. #7
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    deleted .....
    Last edited by kitaman; 02-20-12 at 11:28. Reason: duplicate

  8. #8
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    Pat, maybe you should move this discussion to its own thread.
    Regardless of whether you incorporate or not, you need to create a contract that limits your liability to only the repair of faulty source code.
    You also need to spell out who owns the source code, and what rights each of the parties to the contract has to it.
    You should set your rates at about 2 and a half times the salary you would expect. This covers the time between jobs, and the benefits that you no longer receive.
    Do you have to collect sales taxes? If you do, these are trust funds, and you are personally liable for them even if you are incorporated. The same probably holds true for payroll deductions if you have employees.
    You should also have enough money in a current account to cover 6 months living expenses ( or understanding parents.)
    Jack
    Last edited by kitaman; 02-20-12 at 10:20.

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