Re: Incorporated Independent Contractors

Subject: Re: Incorporated Independent Contractors
From: Peter Kent <71601 -dot- 1266 -at- COMPUSERVE -dot- COM>
Date: Thu, 9 Nov 1995 23:31:06 EST

>>From: Robert Plamondon

1. Incorporation provides very powerful protections against having your house
sold at a sheriff's auction if your business fails messily or if someone
slaps you with a nuisance lawsuit. (Basically, the corporation, not you,
foots the bills, and the corporation's liabilities are limited by its assets,
which will not include your house or your retirement fund if you have any

Roberts, it's my understanding that incorporating does not protect you in
this manner. There's something known as "piercing the corporate veil," and
it's pretty easy for someone to do if you are running a personal-service
business, as most of us are. In other words, just because you are
incorporated, doesn't mean you can't be sued _personally_.

>>2. There are generally substantial tax advantages: your tax burden shifts
from heart-stopping to merely shocking.3<<

What are those tax advantages? Can you give us a solid example? I know about
being able to pay for medical expenses as a corporate expense, and setting up
a pension from which you can borrow, (for a C corp, not an S), but these have
to be balanced against the costs of running the corporation, additional taxes
not paid by the freelancer, and the chance of double-taxation. My CPA told me
a couple of years ago that there were _no_ great tax advantages in my
situation. So what are the advantages?

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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