Re: Incorporated Independent Contractors

Subject: Re: Incorporated Independent Contractors
From: Peter Kent <71601 -dot- 1266 -at- COMPUSERVE -dot- COM>
Date: Mon, 6 Nov 1995 10:19:09 EST

>>Are most freelance tech writers incorporated? Is there a need to be? A
recent posting in contained the following comments:
Must have 5+ yrs tech writing, including 6+ mo. Framemaker.
Must have 3+ yrs working with/or documenting networking. Must
have experience working on own. If you are set up to work from
home, you can do so for slightly lower rates. If you have good
liability insurance and are incorporated, you can work as an
IC. To convert documentation for existing product so that it
conforms to established product line manuals and to supplement
documentation in networking.
Sue Ellen Adkins
sea -at- netcom -dot- com<<<<

Most freelance tech. writers are _not_ incorporated. I've heard writers say
you should be incorporated, but I simply can't agree, for a variety of

First, incorporating is a hassle, lots more paperwork. It's also expensive;
you'll pay more taxes. There's a misunderstanding about incorporating, that it
actually saves you taxes. It can in some situations, but many tech writers
will actually pay more taxes. They'll pay taxes on the salary the corporation
pays them, they'll pay taxes on the corporation's profits, and then they'll
pay taxes on any dividends that the corporation pays. Plus there's the cost of
the additional paperwork, either the cost of paying someone else to do it, or
the cost of your own time dedicated to this task.

Some clients think that if the writer is incorporated, they are protected,
that the writer must be truly independent. There are two problems with this;
just because a writer isn't incorporated doesn't mean he's not truly
independent. And just because a writer _is_ incorporated doesn't mean that he
_is_ truly independent--that depends on the specific work situation.

I would advise that writers _don't_ incorporate just to get the few clients
who say you must be incorporated. First, I don't believe there are that many
who won't hire. Certainly many large companies won't, the ones who want you to
come and work onsite as part of a team...but they probably won't hire you even
if you _are_ incorporated, because they usually have their list of approved
tech. service agencies that they work with. But I've rarely run into the
lack-of-incorporation problem; contrary to popular opinion, there are _many_
clients who are not concerned. I've recently done work for Mac Tools (you've
seen their trucks driving around, visiting garages and selling tools),
MasterCard, and Amgen (a big biotech company), all without being incorporated.
Few if any of my small clients express any concern.

There are lots of reasons that you'll lose prospective clients to others. The
lack of corporate status is just one of many, and not a very important one at
that. Someone recently asked me about this problem, then, after the exchange
of several msgs, stated that it had only happened once to him, and that was a
few years ago, so he hadn't bothered incorporating. A wise decision.

Incorporating to avoid this problem is like taking a chain saw to open a
letter. It's overkill. Especially when incorporating often won't be enough for
many of the companies that want you to be incorporated. They'll still go with
a large agency. Rather than spending time and money incorporating, take the
same resources and apply them to marketing, and you'll more than make up for
clients lost to this problem.

By the way, there's sometimes another solution. What clients really want is a
way to protect themselves from the IRS, to say, "we thought he was truly
independent." Of course you should make sure you work in a way that the IRS
regards as truly independent--that way you and your client are protected,
incorporated or not. (And if you don't work in that way, you are at risk,
incorporated or not.) But sometimes a client will be willing to use a company
name on the invoices and contracts (rather than your personal name), and
forget about the incorporation thing. And you don't need to incorporate to use
a company name; simply register one with the state. You'll notice from this
mailing list that the msg signatures often contain company names--and I bet
most of these writers are not incorporated.

I've solved this incorporation thing a couple of times by simply providing a
company name, and the client was satisfied. In most cases, though, I use my
own name, and the client doesn't care. I can't think of any contracts I've
lost because I wasn't incorporated.

Peter Kent

Peter Kent: 71601 -dot- 1266 -at- compuserve -dot- com, 303-989-1869
Coming soon, an updated and revised Technical Writer's Freelancing
Guide. E-mail for more information. Comments/suggestions welcome.

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