Shell Companies for Contractors? 42
dubl-u asks: "What do my fellow freelancers feel about the various shell companies out there? I've got a chunk of work coming up at a place with an especially persnickety contracts department, and I'll probably need to go through a third-party shell company. I used one a couple of years back and they were ok, but there are a lot of them out there, and I'd love to hear about real-world experiences before I sign up. For those unfamiliar with this part of the business, it goes like this: I find my own work; the shell company hires me as an 'employee' and handles my billing and tax withholding for me. Some also 'provide' things like health insurance and 401k plans, although I have to pay for it. You can think of it as outsourcing a lot of the paperwork of being a freelancer. Some outfits, large companies especially, demand this sort of thing."
WBE/MBE/DBE status? (Score:5, Interesting)
If they could offer inclusion into one of those categories, it would be a pretty big advantage in bidding on some projects.
Re:WBE/MBE/DBE status? (Score:2)
Re:WBE/MBE/DBE status? (Score:1)
Spent most of my carrerr doing this (Score:5, Informative)
If you are bring in the contract, and have the rate set, they should be getting no more than 25%. Remember, as a w-2, they have the costs of social security, worker comp, libabilty and their staff.
On a 1099, no more than 10%.
If you feel you will be getting more of these, put together a LLC if you have one other friend also contracting. Two employee make for a group health plan under California law.
Do not let your health insirance lapse for more than 59 days. Otherwise under federal law the health insurance companies can absolutely screw you. Can we all say Pre-existing Conditions.
I can write several pages on this. Anybody want advice, read all the postings and contact me.
I've been a indepentant contractor, gone through agancies, been a salaried employee of several body shops, worked for beltway bandits. 21 years of this.
Bottom line, do a 1099 if you can. Do not under any circumstance let your health insurance lapse for more than 59 days.
Re:Spent most of my carrerr doing this (Score:5, Interesting)
Actually, many large companies (including mine) are even more restrictive-- not only do they require a contractor to work for a shell company, the shell company needs to be on a (usually short) list of approved vendors.
Forming your own shell doesn't solve this...
Re:Spent most of my carrerr doing this (Score:1)
Re:Spent most of my carrerr doing this (Score:2, Interesting)
If the answer is 1, your options are many up to and including setting up your own company. If you are not int
Re:Spent most of my carrerr doing this (Score:4, Interesting)
The ones I've looked closely at, ZeroChaos.com, MyBizOffice.com, and PACE all charge less than that. ZeroChaos is very vague about their fees, but they quoted me $300 per month per active client. MyBizOffice charges 4% for the first $125k in billings and 1.5% after that. And PACE charges 5%.
I don't think any of them will do a 1099; they all seem to do W2s, and of course all of the taxes come out of my share. At least one of them has an intriguing lease-back program, where I buy the equipment I want, lease it to the shell company, and then they deduct the leasing fees from my inccome. I believe this is a dodge to get the same tax benefits for capital goods as working on a 1099.
Just create your own S-Corp (Score:4, Interesting)
Then they are doing business with a corporation and you might be saved the cost of dealing with the shell company.
Re:Just create your own S-Corp (Score:5, Interesting)
In MI you can create an LLC for a grand total of 60 bucks. 10 dollars for the county DBA (doing business as) and 50 bucks to register the paperwork with state. You don't even need the DBA later on, you could just skip that.
Piece of pie.
Re:Just create your own S-Corp (Score:5, Informative)
> 60 bucks.
Some companies will not contract with a corporation that has not existed for some minimum number of years. Others require proof that the corporation have a minimum number of employees and/or a minimum annual revenue.
Re:Just create your own S-Corp (Score:2)
Talk to an accountant (Score:2, Insightful)
Re:Just create your own S-Corp (Score:2)
Sorry it cost you.
As long as (Score:2)
Your shell company doesn't do what mine does and takes HALF of the contract amount (total is $65....they get HALF to have me work where I do) you should be fine
I know I am not the only one in this boat that doesn't get any of the benefits of a contract yet supports this company just so I can pay my bills. It sucks, as they make as much as I do just because I show up to work.
Let the vultures start working (Score:1)
Now if you are able to 1099 to the company directly (so you get the WHOLE check) you are well off, companies that are used t
Re:Let the vultures start working (Score:2)
Re:Let the vultures start working (Score:1)
Now I've found another contract elsew
Did anyone else.. (Score:5, Funny)
Re:Did anyone else.. (Score:3, Funny)
Kelly Technical Services (Score:3, Interesting)
I did this w. Kelly Technical Services a few years back. I had the deal all worked out with the client company, and then contacted a number of shell companies to negotiate who I'd go through. Except for a brief period when they had an idiot working in the office (a problem which they quickly corrcted) they were quite reasonable.
A friend of mine used (IIRC) "T. H. Yoh" and liked them as well.
The market has changed a lot in the last five years, so YMMV.
-- MarkusQ
More w/ Less. (Score:1, Funny)
Re:Kelly Technical Services (Score:1)
tagline question (Score:1)
Re:tagline question (Score:2)
Is your tagline from Rhapsody in Blue?
Yes.
-- MarkusQ
Fairly common in UK (Score:4, Interesting)
Some will also provide pensions/holiday pay, but I've been happy working with the concept that I get paid for what I work. It makes for some lean times (e.g. Christmas) and some gluts (I've done a 7 day week before) but effectively balances out.
It's a simple way of working, as you count as a normal employee in most ways which simplifies tax.
Re:What about contractors in India ? (Score:4, Interesting)
There are a lot of reasons. Most of them boil down to the advantages of physical presence, which provides high-bandwidth, low-latency communication. Others are primarily social.
There are times when outsourcing can make sense. If you have a clear spec and people can implement it properly without asking any questions, then sending the work off can work. But this contract includes analysis, design, construction, and training in a short-cycle iterative process. Outsourcing that to another timezone is impossible.
Hint to those worried about their jobs: standard software practices don't take proper advantage of physical colocation. Adopt a process like Extreme Programming, which does, and you'll have a business advantage that can't be matched through outsourcing to Outer Slobovia.
If you can get out of "contractor"... (Score:3, Interesting)
If you turn the tables and sell a "product" instead, you will avoid the contractor's ball of wax but arrive at a different set of problems instead. You won't get paid until the product is delivered (probably 30+ days after the product is delivered - purchasing departments sometimes specialize in pushing every term to its limit) and you will have a different set of purchasing hurdles to overcome. I happen to think that in many cases the "selling a product" road is superior - especially for a project you know can do in firm fixed price/firm fixed terms - but look closely at the disadvantages before jumping. Tim.
Big push for this (Score:4, Informative)
the big "shell" companies to move all independent
contractors to employee status within their company.
It's a heavy trend, and independent contractors
currently have the choice of accepting a
permanent position with one of these few big
names of face the real prospect of being out of
work for several months. I know several
highly skilled contractors who spent between
5 and 13 months at home with no income, slowly
eating into their savings, until they found
another contract.
The ugly part is that hourly rates for
contractors are down 40-60% this year compared
to 1999, and contractors switching to employee
status face even bigger paycuts.
Personnally my contract ends at the end of May,
and I have been offered to continue my current
work as an employee instead of as a contractor,
and I am being offered a whopping 66% reduction
in my compensation. Still, I might stick with
the job, it's better than no job at all.
This is compounded with a 4.6% inflation rate,
and a 45% surge in housing prices in the last
year, a 15% increase in real estate taxes, not
to mention the effect that the stock market
crash has had on my savings.
But for these shell companies, these are good
times; for each open position they receive
a few hundred resumes of skilled IT
professionals who are currently unemployed
and eager to accept the job, no matter how
low the salary.
Professional Association of Contract Employees (Score:2)
You may also be interested to read my pages Market Yourself - Tips for High-Tech Consultants [goingware.com] and GoingWare's Policy on Recruiters [goingware.com].
UNIX Admin team forming consultancy (Score:2)
Anyone else out there forming companies of their own? Any tips or book pointers for those of us starting out?