Wednesday, June 18, 2014

Setting Up Your Own Business

Last year, I was required to create a business so that I could independently contract with a company (doing consulting work).  I had many friends and co-workers that said I should just set myself up as an S-Corp (a corporation filed under chapter S which allows you to just pay yourself all company profits without having to pay corporate taxes on that revenue).

Don't Do It

I followed the advice of friends that said it was easy.  Went through Legal Zoom to have them file my papers of incorporation and applications for Chapter S status.  I set up a business checking account and got myself an EIN (Employer Identification Number - social security number for businesses).

Seemed rather simple.

But then payroll, and taxes and unemployment insurance and workers compensation and state taxing authorities all started looming large.

For about six months of highly-paid work, I had to work MUCH harder on just administrative bullshit to run an S-Corp than I did for my client.

How do you calculate pay (gross to net) for yourself?  How do you pay withholding taxes to Federal, Social Security and State taxing authorities.  How do you set up an account with those taxing authorities.  How do you generate a W-2 for yourself?  What year-end filing is required.  Should I expect a 1099 from my client?  How do you close out a business?

I know most of these things you can find out via Google...but you have to know what to ask.  I truly wish I had just hired a local accountant and let them figure it all out.

I think I'm almost at the end of this nightmare, but I'm still not sure exactly what it takes to close out the business so that I'm not required to file quarterly taxes to State and Federal authorities.

Current Knitting/Crochet

The Bright Lizard Scarf has been finished, casted off and block, and it's more beautiful than I expected it would be (and I blame Claudia's Hand Painted Yarns for this...not myself).

I ended up writing up the pattern and putting it out on Ravelry for sale.  I've decided to contribute any  proceeds from the scarf to Kyle Kunnecke's AIDS Walk fund, it that provides additional inspiration for folks to purchase the scarf between now and Kyle's fundraising deadline of July 20th.

If you'd prefer to donate $25 or more directly to Kyle (and get the tax deduction yourself and be eligible for his great prizes), just send me a copy of your donation receipt and your Ravelry ID, and I'd be glad to send you a free copy of the pattern via Ravelry.

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