Re: Incorporation

Subject: Re: Incorporation
From: "Hyde, Barb # IHTUL" <Barb -dot- Hyde -at- TULSA -dot- CISTECH -dot- COM>
Date: Fri, 19 Feb 1999 09:15:37 -0600

Having contracted with the government off and on since 1984, yes, it
is common practice to require incorporation. The government will not get
involved in paying an individual 1099 money. They want to deal with a vendor
(thus the incorporation). You invoice them periodically from your company,
they pay the company in 1099 money, and you do what you want with the money.
A lot of this is tax law stuff. If they say when you work, where you work,
and supply the equipment, the IRS calls you an employee of theirs. OTOH, if
they pay your company and the company tells you where to work, when to work,
etc., you are an employee of your company.

A couple of things to keep in mind:
1. Incorporate as a sub-chapter S corporation
2. Treat yourself as a W-2 employee - there are some big benefits
in pre-tax saving (SEPs) if you do.
3. Try to keep at least one other little contract going on the
side. The IRS takes a dim view of one-man corporations who work at the same
position for years!
4. Send you invoices in frequently. This establishes cash flow and
keeps the amount small enough so that approval doesn't get kicked up another

> Date: Thu, 18 Feb 1999 23:09:36 -0500
> From: Keith Bennett <bennettk -at- EROLS -dot- COM>
> Subject: Incorporation
> Hello Folks:
> I've got a great opportunity coming up to work with a software development
> company to produce documentation, both print and online, for one of their
> products. I spoke with the project manager of the company and things seems
> fine. One problem, however, was that he said I would have to be
> incorporated as the client for this project is the federal government and
> suggested - no insisted - that I be incorporated to be paid as a
> subcontractor. I thought this very odd as I've never encountered this
> situation before in my contracting career. I've been reading Peter Kent's
> book on the subject and pretty much agree with him that there is no real
> reason why I should become a corporation for this job.
> Is there? Is this the norm for federal government contracts? I would
> really
> appreciate any and all thoughts on the subject.
> Thanks.

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