Moonlighting as a consultant

July 3, 2014 11:44 AM

I have some specialized expertise in a niche engineering market. I have a fulltime job but am thinking about moonlighting as a consultant in the US. Questions about the business aspect below.

Right now I am thinking about offering a particular service, running a small piece of software to allow businesses to meet state regulatory requirements. I may also be willing to do larger or more complex projects in the broad area of engineering-niche as well.

I was imaging setting up (engineering-niche related term) Consulting. I have a similarly named domain already. I have no real sense as to whether this will bring in money, or how much.

I could slap up a web page offering these services over the weekend. What do I need to do, or should I be doing on the business front?

Should I set up an LLC or register a DBA? Would starting out operating just as myself and directing clients to write checks out to me personally be a terrible idea? Would not talking to a lawyer/CPA before doing anything else be stunningly foolish?

extra credit: I might like to split up some of the (theoretical) work with a friend from graduate school. Should that be included from the getgo?

Anything you can do to fill the gaping void that is my knowledge of running a business is welcome.

posted by pseudonick to Work & Money (4 answers total)

Well. what kind of liability could your work incur?

I work in a field (Web development) where pretty much everyone moonlights, and most people do it just as "themselves." But the worst thing that can happen if we screw up is usually "Oh there's a bug on the website can you fix it?" If your work exposes you to more serious risks than that, you should consider talking to a lawyer about setting up (probably) a LLC.

Do note that some states charge a minimum tax for LLCs whether you do any business in a given year or not. In CA it's $800! Also note that some municipalities, such as city of Los Angeles, will hit you with a "business tax" if they see on your tax return that you're consulting. This can happen whether you have a corp. or not.

For me personally, I just did it as myself, invoiced people, and used Turbotax to figure out the tax aspects. But if you're looking to set up a long-term, serious business, it's worth talking to a pro.
posted by drjimmy11 at 11:50 AM on July 3, 2014

Step one is to make sure your full-time job will allow it. I'm in an engineering/consulting field. I've never had to sign a non-compete, but my company's handbook is very clear on our no-moonlighting policy. (I think people have gotten away with, say, working at a bar over the weekend, or with doing pro bono work. But actual paid engineering/consulting work is totally out.)
posted by pie ninja at 11:54 AM on July 3, 2014

2 quick updates in response to drjimmy11 and pie ninja (Thanks for the responses)

I don't think the liability is significant, although I will do more research. Probably more liability than a website bug, but no one's life will be on the line. I think very worst case is someone would have to refile regulatry documents and possibly pay a tiny fine to a state environmental regulator (For once I'm glad state environmental regulations have few teeth).

My full time job will allow it. I am a federal employee and talked it over with my ethics office. There is no conflict of interest. I do have to carefully refrain from making any reference to my federal employement when doing business for myself though.
posted by pseudonick at 12:03 PM on July 3, 2014

I think one big thing to think about is sales and business development. In general, the more complex and higher-margin a consulting engagement is, the higher-touch the sales cycle is. Just putting up a website would probably get you a better hit rate for the software-based regulatory filings than complicated projects, but I think for any kind of professional services, it's going to go a lot better for you if you have a professional network of people who are in a position to buy those services that you can work through, rather than just putting a shingle out there and waiting for business to come in. If these are services that one particular buyer would only need infrequently for a specific project, that will also mean that you need a more active new client pursuit process than if these are routine needs where you can build up a stable of established clients who are regularly purchasing work.

So far as bringing your friend from school in, have you thought about what the compensation structure of that would be? Is the expectation that they would just be an extra pair of hands for service delivery, or would they be part of new business development too? If you two would play roughly equal roles in both sales and service delivery, another structure that may make sense would be a partnership like an LLP - probably a good discussion to have with a lawyer or CPA.

Another thing to start thinking about now is your fee structure. Are you going to bill by the hour, or offer projects for a fixed fee determined up front based on the project scope? Do your fees for the regulatory filings include any support for appeals or re-filings if the original filings you prepare are rejected or found to be incorrect, or does that cost more on top of the original filing? Are these the type of project where the scope might change partway through? If so, your fee structure should make a provision for how scope changes will be agreed upon and priced. When you're in a relationship with an established client, in can be tough to put through a rate increase on new projects once they're used to paying a particular price, so you should think about that when setting your rates too.
posted by strangely stunted trees at 1:28 PM on July 3, 2014