Re: 1099 vs Incorporation Pros &* Cons

Subject: Re: 1099 vs Incorporation Pros &* Cons
From: "Elna Tymes" <etymes -at- lts -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Mon, 08 Jan 2001 14:02:42 -0800

slave writer wrote:

> I've been working as a 1099 contractor for some time now, but I've noticed
> lately that companies are using my services less and less. All of them seem
> to want to use Incorporated writers and I was wondering if anyone out there
> could give me the pros and cons of such a move.

Generally speaking, people who work on a 1099 basis are subject to the way
personnel departments interpret the latest set of workplace rules from the
IRS. This last year, it's been easier to distinguish yourself as an
independent contractor, as opposed to an employee, and thus many companies have
eased up on the restrictions regarding using independent contractors.

People who are incorporated have at least one more legal barrier that separates
them from employees: they have the corporate shell. However aside from some
other benefits that corporations offer people, there's substantially no real
difference between contracts as a 1099 contractor and as a corporation. Both
situations require that you carry your own workmen's compensation insurance,
both require that you pay your taxes separately, both have certain IRS
reporting requirements, etc.

What you may be running into is a general level of misunderstanding among
employers and agencies about the real differences between being incorporated
and being a 1099 contractor. In both cases, the employing company has to
report a tax ID when it pays you: if you're a corporation, they report your
corporate tax ID, if you're a 1099 contractor, they report your Social Security
number. In both cases they pay a full invoiced amount, rather than deducting
for taxes. In both cases, the paying company is running the risk that the
receiving entity (corporation or 1099) will pay the appropriate employment

> BTW, does anyone know a good Incorporation lawyer in the SF Bay Area should
> I need to move in this direction?

You don't need a corporate lawyer to do this. Go to the Nolo Press side
( and download the do-it-yourself incorporation book and follow
the instructions - which are very clear and easy to understand.

Elna Tymes
Los Trancos Systems

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