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Becoming self-employed

  1. Mar 27, 2010 #1


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    Hello PF-friends. As you always produce excellent answers to my inquiries I drop by, again -- this time with a few questions regarding self-employment.

    I'm currently finishing my bachelor-degree in operation and maintenance, writing a project paper in cooperation with company. The company is located some distance from my educational institution, and I had to make a case to get to write for them (they pay f.ex all my expenses for travelling and board and lodging.)

    My history with the company is 8 years. I started as sheet metal worker apprentice, and got my certificate of completed apprenticeship 4 years later. Then I started to study mechanical engineering, but I've worked there at every opportunity.

    I'm highly regarded, not only by my fellow workers but also the administration. I plan on studying further (HSE), but I wanna work there this summer.

    My question is, should I try it as self-employed? To be honest the main reason I wanna is the money. Last year I earned $21000 during 9 weeks of summer, but I worked a hell of a lot, and only raked in $28/h. There was some whispering in the halls about me working too much overtime, etc. It was then suggested that I started as a self-employed to get the heat of the company I worked for, if anything happened.

    Thing is I worked for a company which is doing the maintenance for the company I'm writing my paper for now. They charge $55 for a mechanic, and $90 for a engineer.

    My idea is why don't I skip a link, and go straight to the provider? Hire myself to the company I now write a paper for for, for ex. $60/h? What are the pros and cons?

    Am I burning any bridges by even bringing it up? Suggestions and advice are highly appriciated, and if anythings unclear feel free to ask.

    As I'm gonne continue to study, for now a M.tech, would it be appropriate to just get hired there for the summer to get some good-will for later? I know they are willing to give me scholarship (subsidize my studies) against me working for them a few years, or even do some work as I study.
    Thanks a lot! :)
    Last edited: Mar 27, 2010
  2. jcsd
  3. Mar 27, 2010 #2


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    Contract work can be a bit unsteady, but then so can employment depending on the company.

    Depending on where one lives, a self-employed person pays all taxes, pension and healthcare (insurance). And there is also the matter of personal/professional liability. Certainly, look in forming one's own company/corporation.
  4. Mar 27, 2010 #3
    + People that are self-employed tend to be happier about their jobs
    + There is more flexibility if you go from contract to contract
    + There are a *lot* of tax deductions.
    + You could make more money since you remove some middlemen
    + You get to learn a lot of things. Taxes, legal issues, getting clients.

    - You have to deal with a *lot* of things. Taxes, legal issues, getting clients
    - You are likely to be the first person cut if the economy goes bad
    - You are likely to end up making less money
    - Health insurance is impossible if you have a pre-existing condition (although this is going to change soon)

    The first thing that you need to do is to work through the numbers to figure out what you can charge. If you work as a contractor, you'll have to pay a different set of taxes, and you'll also have to include time for overhead and the possibility that you will be out of work.

    If the numbers look good, then it's not a bad thing to bring it up. If you've sign any employment contracts, you may have to have a lawyer look at them.
  5. Mar 27, 2010 #4


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    @OP: I loved being self-employed as a consultant to pulp and paper mills, and I always had more offers of work than I could comfortably take on. Eventually, my respiratory problems/allergies made it impossible for me to fly, or I might still be working in such a capacity. You're going to have to work out the numbers for yourself, though, and you have gotten excellent suggestions in the first two replies to your post.

    You'll have to pay all your own taxes, and the IRS wants their money up-front, quarterly. Estimating your income accurately is no problem if you have some long-term contracts, but can be tough if you take on some lucrative side-jobs that pop up unexpectedly. You will be responsible for 100% of your SS taxes, not the 50:50 split you were accustomed to as an employee. You may have to carry professional liability insurance, and that can be pricey. Back in the '80s, I typically carried $1M in liability insurance, though given the nature of my specialty (training operators of chemical recovery boilers, power boilers, turbine-generators, etc) I was WAY under-insured. For one particular contract, I was also required to submit proof of Workers Comp insurance. The insurance wasn't too expensive, but the state took that policy as "proof" that I had employees, and bombarded me with demands that I start paying withholding and unemployment insurance on them. That was a hassle. I wasn't glad when that contract ended, because it was a sweet one, but I was happy to drop the WC insurance and get the bureau of taxation off my back.

    Then there's the little matter of obtaining and paying for health insurance... You'll have to keep very meticulous records so that you can document your expenses to the IRS and keep your taxable income reasonable. You'll have to find out what is permissible to charge off as expenses, and in what amounts. If you have an office in your home, learn how to pro-rate permissible expenses related to its upkeep, so you can write that off, too.

    This is not an exhaustive list of stuff that you'll have to deal with. You might want to talk to an accountant and get some professional guidance. Many accountants/tax advisors are themselves self-employed, and they'll have first-hand knowledge of what you'll encounter. Good luck, either way.
    Last edited: Mar 27, 2010
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