You get much of the flexibility of business ownership, without having to jump into the deep end of a stand-alone operation! Furthermore, you can both save money on taxes and protect your assets! Nonetheless, how you set yourself up to operate as an independent contractor, can make a big difference in your bottom line…
1099 Income: This means you are contracted by a customer on a project-by-project basis. They don't have you on “W2 payroll” and do not deduct freelance taxes on your behalf.
Business Entity Income: This option is where you create a separate business entity for your freelance business activities.
In layman's terms, this would be an entity that has a separate business name and has the “INC” or “LLC” designation at the end of it. You likely would also want to get the “S Corp” designation for tax purposes.
Here are all the amazing benefits:
Business Deductions You will get the most allowable business deductions available.
Business Credit You will be able to build business credit that won't show up on your personal credit report and affect your credit score.
You will have the most desirable set-up to help employers feel comfortable paying you as an independent consultant rather than via W2 Payroll.