How to Incorporate Yourself to Save Money
(and Protect Your Assets)
So you are a freelancer or independent contractor and you want to know how to incorporate yourself.
Are Taxes for Independent Contractors Better or Worse than the Average Employee?
Business owners are offered significantly greater tax benefits than a standard W-2 employee. And while freelance taxes offer similar benefits, they may not be quite as good as an actual business entity.
What Determines the Way I Get Paid? There are two ways an “independent contractor” or “freelancer” can be in business. They can get paid as an unincorporated 1099 contractor or can incorporate themselves and get paid to their corporation. There is potentially a tax difference between the two!
Here are all the amazing benefits:
Self-Employment Tax Business Deductions Legitimacy for Customers Liability Protection
1. CREATE THE ENTITY -You are potentially going to create an INC or LLC entity, possibly with an S Corp classification (but again, you may want to also get advice form your CPA or attorney on what’s best for your situation).
How Do I Set Up My Entity?
-Once your entity is established, you have to set up “employer accounts” with the fed and state so you can run some payroll for yourself.
2. OBTAIN A TAX ID# FROM THE IRS (ALSO KNOWN AS AN EMPLOYER TAX IDENTIFICATION NUMBER OR EIN)
3. FILING YOUR S CORP ELECTION (IRS FORM 2553)
-After you obtain your Federal EIN, you will need to fill out and send in your S Corp (small business corporation) election. Again, this is IRS form 2553. It’s pretty simple, and takes about 5 minutes to fill out.
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