0

I have been working on a w2 most of my career and recently got the opportunity to work as an independent software developer for a firm on a 1099. I was thinking of setting up an S-corp as I think seriously of more independent opportunities.

Is there a checklist of things I should be aware of before jumping into this, as I am still researching this subject and the prospect / benefits and more clear relationship of the firms hiring me as a independent contractor vs an employee in the eyes of IRS make complete sense to me.

Note : I am posting a question here as most of the material I googled seem to be dishonest and trying to sell me something

5
  • 2
    At some point you've may have found the Small Business Administration site and the section on Choose a business structure. Apr 6, 2023 at 2:05
  • 1
    An S-corp is an issuer company looking for shareholders. A single-member LLC would be much simpler. However, the only thing required to put a business on a Schedule C is a DBA name and possibly a business license.
    – S Spring
    Apr 6, 2023 at 4:35
  • @SSpring there's absolutely no requirement to have neither DBA nor a business license to put a business on a Schedule C, and S-Corp doesn't necessarily need to exist in order to look for shareholders - in fact most corporations restrict their share issuance and rarely seek out new shareholders.
    – littleadv
    Apr 6, 2023 at 6:16
  • Good practice is sometimes expected of business owners. DBA's and business licenses are very basic proprietor operation. But an S-corp can organize shareholders. It's easy to issue stock from an S-corp. An S-corp is allowed 100 shareholders. If the stake-holders seldom vary, and are not too many, than a multi-member LLC might be more likely. Most proprietors now go with single-member LLC's. In some cases a husband and wife can be a single-member LLC.
    – S Spring
    Apr 6, 2023 at 10:52
  • Do you understand the difference between "the only thing is required" and "Good practice"? I can't see why a software engineer working on 1099 would want or need either a DBA or a business license. For your second point - there's so much more difference between a LLC and SCorp other than the ease of issuing shares... In fact - that would be the smallest. You clearly don't know what you're talking about.
    – littleadv
    Apr 6, 2023 at 16:26

1 Answer 1

2

Is there a checklist of things I should be aware of before jumping into this

Yes.

  1. Talk to a tax adviser - EA, or a CPA/Attorney specializing in taxes and licensed in your State. Technically any licensed CPA or Attorney, and any EA, can provide tax advice. But most Attorneys and many CPAs do not specialize in tax, let alone specific issues pertinent to your kind of occupation. My experience, especially with attorneys, is that they don't know tax at all unless that's the area they practice. There's a reason why I'm emphasizing it, it's the next point:
  2. Talk to an attorney specializing in business formation. A corporation is a legal entity separate from yourself. It exists not just for tax purposes, but for any other as well. You need to manage books, you need to have shareholder meetings, you need to appoint directors and officers, you need to pay salaries. There are requirements on how to manage a corporation, and what protections and legal benefits and disadvantages it has.

I am posting a question here as most of the material I googled seem to be dishonest and trying to sell me something

Usually people who "sell" you S-Corps will also try to sell you tax "avoidance" schemes. I put it in quotes because for most parts it would be plain evasion, on the hopes that you don't get audited by the IRS. Hence a proper advice from a licensed tax professional is suggested.

There are a lot of questions about S-Corps here. We've had examples on this very forum of users who ended up realizing that they got themselves in too much of a mess, sometimes too late to easily fix it (sometimes, luckily, not too late).

1

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .