Experiences with Incorporation for Contract Corp to Corp "Interaction Design" work

2 Jan 2007 - 4:24pm
7 years ago
1 reply
815 reads
jrrogan
2005

I am curious of others experience with Incorporation for Interaction Design
consulting work. This incorporation would be for a small company, involving
one or two consultants working for in the incorporated company, which would
be contracted by other companies. The incorporation considered is a Delaware
LLC arrangement, (Limited Liability Corporation), via sites such as "
http://www.thedelawarecompany.com/_Prices/Services.html", which have 1 day
incorporation

The advantages are supposed to be:

Tax advantages

Limited liability and liability insurance

Other advantages...

Questions:

How difficult was it to file corporate taxes?

What were the biggest problems with incorporation?

What were the biggest problems after incorporation?

Other things to consider?

Also I have heard rumors of associations, (AMC???, does IxDA have any
services such as these?), which have insurance services, (both liability and
health).

What are other's experience with incorporating for consultancy work, and are
there any things to watch out for or items to consider before hand?

Thanks for any advice,

Rich

Comments

2 Jan 2007 - 7:34pm
DanP
2006

Hi Rich,

I'll jump in with some random experiences from an S-corp I've run.
Hope it helps.

>
> How difficult was it to file corporate taxes?
>

It's not difficult if you get a good accountant. If you are in
California, I'll be happy to put you in touch with mine - she's
amazing. There are some considerations.. For one, you'll want to hold
and keep accurate and up-to-date minutes of shareholder(s) meetings.
It's wacky, especially for a small LLC or S-Corp, but those are the
rules... In California, I was diligent in filing the DE-99 forms for
all payroll, and eventually needed to contract a payroll company to
keep things flowing after obtaining a third employee. There was just
too much paperwork to do it all myself. Without employees, the
situation became much more manageable.

> What were the biggest problems with incorporation?
>

For me, it was the paperwork and the worry about being audited.
Keeping receipts, filing payroll, filing quarterlies, keeping my
quickbooks accurate... Also, keeping all of my business and personal
finances separate was initially a difficult, but ultimately
manageable challenge.

> What were the biggest problems after incorporation?
>

Nothing was really that problematic - I was lucky to have a good
accountant who walked me through the process. Just keep on top of
those records. Quickbooks was quite a help.

> Other things to consider?
>

Consider the amount of money you intend the corporation to bring in
initially, and how many actual on-the-books employees you intend to
have. In my case, an S-Corp was much easier and less expensive to
cope with than an LLC for the intended goal. Again, an accountant can
help you decide. Also, several accountants told me that incorporating
in Delaware was not a real benefit, and may actually cause more
issues than it was worth. I no longer have the data to back that
statement up, but you should talk with someone before incorporating.

All in all, I would say incorporating was of great fiscal benefit to
me. I was able to recoup many of my business expenses, and the tax
benefit was truly worth the time and effort. Additionally, I gained
valuable knowledge on the process of what really goes into running a
small corporation.

For the initial incorporation, you might want to consider just using
a local company to help you file your articles - it is much more cost
effective. Online "filing" companies try to sell you a ton of extras
that you don't need, and have high prices... For instance, it cost me
1100.00 to incorporate with an online service, when it could have
cost 350.00 locally. It's really not that complicated to file
articles of incorporation - but I'm wasn't savvy in that respect, and
didn't want to worry about it.

>
>
> What are other's experience with incorporating for consultancy
> work, and are
> there any things to watch out for or items to consider before hand?

Many companies will also require you to provide proof of insurance in
order to work corp-corp, so you'll want to contact a good business
insurance company to be ready for that. "The Hartford" helped me
sufficiently.

I believe that the protection from liability (protection of my
personal assets) and tax benefits made this worth my time and effort.
Also, many companies would only allow corp-corp for their consultant
gigs, and once was on their "registered vendor" lists, it became much
easier to land further contracts. Sun Microsystems, for instance, was
a great example. They had the corp-corp thing down to a science, and
were wonderful to do business with. Your mileage will vary.

Good luck,

-Dan

-------------------------------------------------------------
Dan Peknik, Industrial/Interaction Design
San Jose State University * NASA Ames
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