How does one move from employee to independent contractor intelligently?
November 12, 2012 9:26 PM Subscribe
My husband is a computer programmer and is considering moving to independent contracting. We are researching the idea. I normally do well with Google, but I'm failing this time. Please help?
posted by RogueTech to Work & Money (10 answers total) 8 users marked this as a favorite
My husband is currently an ETL (IT) programmer with a medium sized company that hires contractors on occasion. He has a good relationship with his immediate boss and team, but has some issues with the overall job structure. The main complaints are office politics and that his team has shrunk from six programmers to two with no reduction in work over the last year and a half.
He's made the decision to quit with my blessing*, and he let his manager know today that his last day would be the end of the year. She immediately asked if he'd consider consulting on a per-project basis, as he has some specialized knowledge that is not easily replaced.
He is considering the idea - he enjoys what he does and believes working on a per-project basis would reduce many of the stresses the job currently has for him. For instance, he's currently working on six projects. If he were an independent contractor, he could accept just one project and work on it to completion, instead of juggling 5-6 project simultaneously. The work is easily broken out into 2-3 month projects and he'd be able to work from home, which is a big plus for him (he's a strong introvert).
We've done the research and have a fairly decent grasp of the tax implications. The plan, should he decide to go the independent contracting route, is to set up an LLC and have a small business contracts lawyer review the planned "standard contract" and/or any contracts offered by the business to my husband to ensure that he adequately understands to what he's agreeing to do. I've found plenty of info on how to file quarterly estimates and on what does and does not count for business expenses. What I cannot find, and what we'd both like to understand, are some of the potential pitfalls of moving from an employee to an independent contractor, especially when you will be working (at least at first) for your old company. I've tried about every Google search and MetaFilter search I can think of, and can't find anything, and he's in the same boat. Any resources, books, websites, personal anecdotes, etc about making the transition from employee to independent contractor as a programmer are greatly appreciated. We're in the U.S. in Michigan, if that makes a difference.
* We have been discussing his leaving this position for the last year or so. We've been living comfortably on my income in that time, and used his income to pay off our debt and save up a 6 month cushion. My job is very, very stable and I love it, so we're in a good position for him to take some time off or explore this independent contracting idea. We have no kids and no mortgage, so our risks are fairly minimal, all things considered. He'll be covered under my health insurance through my job.