Self employment
Dec 21st 2007, 8:55 am
#47
gurt mint nit?
Joined: Nov 2007
Location: In my shed
Posts: 2,776
Re: Self employment
I will limit my comment to the Far East Asians.... Americans don't use the word "Asian" to mean the subcontinent.
The thing that sticks with me most is the fact that Japanese employees have committed suicide when they feel they have failed their employers.... as did the Chinese CEO when that company's toys were found to have high lead levels (this was within the last few months). Imagine working with someone who, if they fail, might do this. You do everything you can to make sure they have correct, up-to-date information and still you don't sleep until the problem's solved.
The thing that sticks with me most is the fact that Japanese employees have committed suicide when they feel they have failed their employers.... as did the Chinese CEO when that company's toys were found to have high lead levels (this was within the last few months). Imagine working with someone who, if they fail, might do this. You do everything you can to make sure they have correct, up-to-date information and still you don't sleep until the problem's solved.
Dec 21st 2007, 4:15 pm
#49
Bloody Yank
Joined: Oct 2005
Location: USA! USA!
Posts: 4,186
Re: Self employment
Thanks for your input, very valuable information. Currently, I have a S corporation set up and have registered it with the state amongst other things e.g company bank account, company credit card etc.
So far I will be doing this while I still have a full time job but thanks for the things to look ahead in advance.
So far I will be doing this while I still have a full time job but thanks for the things to look ahead in advance.
Generally speaking, LLC's allow for more flexible tax treatment. If some of your income will be derived from passive investment activity, then LLC's can also make more sense.
One cautionary detail about S-corps. Since you are an employee of the S-corp, once you go full time, it may be tempting to underpay yourself in an effort to reduce your social security taxes. Be careful of this -- the owner's income is an audit flag, and the IRS will be comparing your business' revenues and incomes to your salary and title/role in the business to make sure that you are compensating yourself at the market rate.
Best of luck with your venture.
I suppose that I should have listed that as an advantage. With zero vacation time, I have more now than I ever did as an employee.
Dec 21st 2007, 4:19 pm
#50
gurt mint nit?
Joined: Nov 2007
Location: In my shed
Posts: 2,776
Re: Self employment
Well, thats whats really stuck as true over the last year or two.
There really is no major advantage to being employed directly other than getting a discounted health insurance rate.
There are some out there who believe that the whole "company match" 401k thing is a bit of a red herring. As I understand the argument, you really need to be sinking a massive amount of money away in order for the things to work. When there was a dot-com bust here a few years back, I worked with quite a few retiree age blokes who had really great pension set-ups. Company plans, 401k's - all that. Well, they lost enough money to postpone retirement by at least 5 years. There were people who simply were'nt able to retire, period. Not a lot of happy campers.
Nowadays there are no company pensions anymore and everyone is on the 401k/Roth bandwagon.
Point is, you may as well do it yourself as much as you can. The companies really give you nothing more than steady work.
There really is no major advantage to being employed directly other than getting a discounted health insurance rate.
There are some out there who believe that the whole "company match" 401k thing is a bit of a red herring. As I understand the argument, you really need to be sinking a massive amount of money away in order for the things to work. When there was a dot-com bust here a few years back, I worked with quite a few retiree age blokes who had really great pension set-ups. Company plans, 401k's - all that. Well, they lost enough money to postpone retirement by at least 5 years. There were people who simply were'nt able to retire, period. Not a lot of happy campers.
Nowadays there are no company pensions anymore and everyone is on the 401k/Roth bandwagon.
Point is, you may as well do it yourself as much as you can. The companies really give you nothing more than steady work.
Dec 21st 2007, 4:56 pm
#51
Lost in BE Cyberspace
Joined: Jan 2006
Location: San Francisco
Posts: 12,865
Re: Self employment
There really is no major advantage to being employed directly other than getting a discounted health insurance rate.
There are some out there who believe that the whole "company match" 401k thing is a bit of a red herring. As I understand the argument, you really need to be sinking a massive amount of money away in order for the things to work. When there was a dot-com bust here a few years back, I worked with quite a few retiree age blokes who had really great pension set-ups. Company plans, 401k's - all that. Well, they lost enough money to postpone retirement by at least 5 years. There were people who simply were'nt able to retire, period. Not a lot of happy campers.
Nowadays there are no company pensions anymore and everyone is on the 401k/Roth bandwagon.
Point is, you may as well do it yourself as much as you can. The companies really give you nothing more than steady work.
There are some out there who believe that the whole "company match" 401k thing is a bit of a red herring. As I understand the argument, you really need to be sinking a massive amount of money away in order for the things to work. When there was a dot-com bust here a few years back, I worked with quite a few retiree age blokes who had really great pension set-ups. Company plans, 401k's - all that. Well, they lost enough money to postpone retirement by at least 5 years. There were people who simply were'nt able to retire, period. Not a lot of happy campers.
Nowadays there are no company pensions anymore and everyone is on the 401k/Roth bandwagon.
Point is, you may as well do it yourself as much as you can. The companies really give you nothing more than steady work.
Anyway, pretty easy to do the purely financial side of the employee benefits v self-employed calculation. Just start by adding the pre-tax value of all the benefits of employment (including vacation and public holiday pay) and then work out how much it would cost to replace those benefits if self-employed (the biggie for anyone but both young and healthy being medical insurance). Oh, and then throw in the difference between ss tax and self-employment tax. For me, the benefits I receive amount to about 25-30% of my current salary.
Last edited by Giantaxe; Dec 21st 2007 at 4:59 pm.
Dec 22nd 2007, 5:35 am
#52
BE Forum Addict
Thread Starter
Joined: Aug 2003
Location: Nevada b4 California b4 Colorado b4 Valley of plastic and sand, b4 London
Posts: 2,025
Re: Self employment
You're welcome. Since you already have the S-corp, you may want to stick with it. In the alternative, you could kill it off and form an LLC, if you'd prefer, or possibly transition the S- to an LLC. Again, they are quite similar in many ways, but there are also a few unique advantages and disadvantages to each, so it can pay to research the differences.
Generally speaking, LLC's allow for more flexible tax treatment. If some of your income will be derived from passive investment activity, then LLC's can also make more sense.
One cautionary detail about S-corps. Since you are an employee of the S-corp, once you go full time, it may be tempting to underpay yourself in an effort to reduce your social security taxes. Be careful of this -- the owner's income is an audit flag, and the IRS will be comparing your business' revenues and incomes to your salary and title/role in the business to make sure that you are compensating yourself at the market rate.
Best of luck with your venture.
I suppose that I should have listed that as an advantage. With zero vacation time, I have more now than I ever did as an employee.
Generally speaking, LLC's allow for more flexible tax treatment. If some of your income will be derived from passive investment activity, then LLC's can also make more sense.
One cautionary detail about S-corps. Since you are an employee of the S-corp, once you go full time, it may be tempting to underpay yourself in an effort to reduce your social security taxes. Be careful of this -- the owner's income is an audit flag, and the IRS will be comparing your business' revenues and incomes to your salary and title/role in the business to make sure that you are compensating yourself at the market rate.
Best of luck with your venture.
I suppose that I should have listed that as an advantage. With zero vacation time, I have more now than I ever did as an employee.
Very valid point, was thinking of pulling a Google, with the $1 salary thing but now that you mentioned about the way the IRS see things I better think otherwise.
Thanks.
