Can I be an independent contractor for my own corporation?
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Are you self-employed and want to know if you can be an independent contractor of your own corporation? Read this article to find out and also determine if you should form a company.
As the gig economy expands and more people work as independent contractors you’re probably asking, can I be an independent contractor for my own corporation?
Typically, when you think of an independent contractor, a gig worker, or someone who is self-employed you think of somebody that works for themselves.
However, sometimes independent contractors get confused and wonder if they should form an actual legal corporate entity, or rather an official business.
Colloquially, self-employed and independent contractors call themselves small business owners. However, that doesn’t mean they’ve formed their own company, such as an LLC or corporation. When you’re an unincorporated self-employed independent contractor (also known as a sole proprietor) everything—your income, expenses, and liabilities—gets funneled through your own personal bank account.
In this article, we answer whether a self-employed independent contractor should form a company, if they need to, or are required to incorporate, and how they would work for their own corporation.
What is a corporation?
The formal definition of a corporation is a legal entity that is separate and distinct from its owners.
There are a variety of different types of corporations in the United States. Such as S Corp or a C Corp, etc. Each of them has different attributes and tax structures.
However, the most common type of independent legal entity that a self-employed independent contractor forms is an LLC. An LLC is the simplest of all formal legal entities. LLC is short for Limited Liability Company.
Do I need an LLC to be self employed?
The most common type of legal entity for a self-employed independent contractor to form is an LLC. However, you’re not required to have an LLC if you’re self-employed. Actually, you’re not required to form any legal entity or corporation if you’re self-employed. You can simply work for yourself and when it comes time to do your taxes you just attach a Schedule C to your personal income tax return form 1040.
Although, many self-employed independent contractors, freelancers, and delivery drivers want to form a company that is its own legal entity. This is particularly true with the rise and growth of those working as independent contractors and the rise of the gig economy.
Many independent contractors are working for a lot of different companies, and have many clients and different income streams. Therefore, if you fall into this category you might be asking yourself should freelancers incorporate?
It’s advisable to start an LLC for yourself, given that the process is immensely simplified nowadays. You can even avoid paying legal fees and complete the process online. This option is available in most states, so we recommend you read further in this guide on how to start an LLC in California or browse to find the preferred locations.
Should self-employed incorporate?
Should freelancers incorporate?
Whether you should or shouldn’t incorporate is a personal decision. There are advantages to incorporating even if you’re the only employee.
Some advantages to forming a company, such as a single-member LLC, are you have a legal distinction between yourself and your business. Often this is called the corporate veil. We advise you to consult a lawyer to get more details on how to maintain the corporate veil if you do choose to incorporate or are already incorporated.
Independent contractors that form their own company also get to take advantage of the same self-employed tax deductions that they did when they were sole proprietors. A great way to keep track of tax deductions is by using an expense tracker app.
One of the main benefits of having a company that is its own legal entity is it makes you look more professional and credible to your clients and customers.
In addition, forming a company has potential tax advantages if the revenues from your business are substantially larger than your personal cash needs. We highly recommend that you speak to an accountant or CPA if this is the case for you and your business. This is because there could be potential tax advantages that you’re missing out on.
Can I be an independent contractor of my own corporation?
You can be an independent contractor and have formed your own company. However, it wouldn’t make sense for you to be an independent contractor of your own business, if you were the sole owner of that business. However, consult a lawyer or accountant for more complex situations that bring up the question about whether or not your own business, which you solely own, should contract you to do work for it.
When should an independent contractor incorporate?
There is no specific time when you should form a company that is its own legal entity. For some self-employed sole proprietors, it might make more sense to wait a bit. This is especially true if you’re just starting out as a self-employed independent contractor or gig worker such as a delivery driver. This is because perhaps you’re not sure how much money you’re going to make or how long you’re going to be doing this business. Though if you feel like this is the career path for you, then forming a company such as a single-member LLC might be better from the start.
And, if you’ve already been in business for quite a while as a self-employed independent contractor or gig worker, particularly if you’re generating a lot of income, it might make sense to look into forming a business.
Can I incorporate my business myself?
Yes, you can form a business such as single-member LLC by yourself. The corporate entities, such as an S Corp or C Corp, might be a little bit too much structure for a small business owner. All of the benefits that a small business owner would want from forming a separate legal entity for their business are likely available to them with the LLC legal structure. There are many online resources to help self-employed individuals and freelancers start an LLC. Also, you can consult a lawyer to help you as well.
Conclusion
The decision about whether or not to form a business that is its own legal entity as a self-employed independent contractor such as a gig worker, delivery driver, or just a freelancer is a personal one. However, it is a growing trend for self-employed independent contractors to incorporate. As the gig economy expands and more and more people are making their income independent of being a traditional 9 to 5 employee, the options of incorporating are being investigated more. We personally feel that it’s advantageous but again it’s a personal choice.
Why did you choose to form a company?
If you’re a freelancer independent contractor that’s recently or in the past formed a company, such as an LLC or single-member LLC?
We would love for you to share in the comments your experience.
We would love for you to share with our community why you chose to incorporate and what are some of the benefits that you are getting from this choice.
Also, you can share your experience with us at support@falconexpenses.com.
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I used to travel a lot for work. Doing my expenses frustrated me. I would delay submitting them and when I did, I would spend hours taping receipts to paper to scan for my boss. I knew there was a better solution, and I had a background in productivity software, so I created Falcon Expenses. I enjoy creating software that makes people’s lives easier.
In addition, I’m an avid skier and I enjoy hiking, sailing, and cooking.
