Individual Consulting: How Do?
December 17, 2019 9:41 PM Subscribe
I've been informally hired to do independent contracting. I want to make sure I'm covering all my bases before I start. Difficulty level: American in United States doing work for Israeli company.
I'm a Salesforce Admin, in a stable job that I'm more-or-less happy with. I was approached by a former coworker to do some Salesforce work for his current company. I'd like to move towards consulting eventually, so am very interested in working with them. I checked with my current company; they have no issues with me doing sidework for a company whose business is unrelated to theirs, so that's covered.
The questions I have:
1. What documents should I get in place with Startup Co before starting work? What would a contract look like? What already exists is an informal work proposal, no SOW or anything.
2. What tax documents should I make sure to get signed? How is this impacted by them being in another country?
3. Is this worth visiting a professional to get tax and/or business questions answered?
4. What am I not thinking about?
I'm a Salesforce Admin, in a stable job that I'm more-or-less happy with. I was approached by a former coworker to do some Salesforce work for his current company. I'd like to move towards consulting eventually, so am very interested in working with them. I checked with my current company; they have no issues with me doing sidework for a company whose business is unrelated to theirs, so that's covered.
The questions I have:
1. What documents should I get in place with Startup Co before starting work? What would a contract look like? What already exists is an informal work proposal, no SOW or anything.
2. What tax documents should I make sure to get signed? How is this impacted by them being in another country?
3. Is this worth visiting a professional to get tax and/or business questions answered?
4. What am I not thinking about?
4. What am I not thinking about?
I've done some contract work with Israeli companies, and payment seems to be an issue - a lot of the international business payment companies that work everywhere else aren't cleared for Israel. Paypal works, but the fees are high. So make sure the company you're working with has a system in place, or be ready to do a bank transfer.
posted by Mchelly at 7:52 AM on December 18, 2019 [1 favorite]
I've done some contract work with Israeli companies, and payment seems to be an issue - a lot of the international business payment companies that work everywhere else aren't cleared for Israel. Paypal works, but the fees are high. So make sure the company you're working with has a system in place, or be ready to do a bank transfer.
posted by Mchelly at 7:52 AM on December 18, 2019 [1 favorite]
Find out if the company has a US subsidiary they can pay you through ahead of time. If not, push to accept payment through PayPal or via credit card (using PayPal, Stripe or a similar service) and to eat the fees; otherwise you will be looking at a complicated and expensive wire transfer process.
If this is something you want to do part-time or full-time, I'd recommend starting a separate LLC or S-Corporation to keep the books separate. Speak to an accountant about this, as tax laws vary state to state.
For a business dashboard, one thing I've found to be very helpful is And.co - they're a freemium operations dashboard for freelancers and indie consultants/studios that includes a SOW generator, task tracker, expenses reporting, and lots of other useful stuff.
Feel free to memail me if you need any specific advice, happy to help - I've been running a consulting business for a few years now.
posted by huskerdont at 8:21 AM on December 18, 2019
If this is something you want to do part-time or full-time, I'd recommend starting a separate LLC or S-Corporation to keep the books separate. Speak to an accountant about this, as tax laws vary state to state.
For a business dashboard, one thing I've found to be very helpful is And.co - they're a freemium operations dashboard for freelancers and indie consultants/studios that includes a SOW generator, task tracker, expenses reporting, and lots of other useful stuff.
Feel free to memail me if you need any specific advice, happy to help - I've been running a consulting business for a few years now.
posted by huskerdont at 8:21 AM on December 18, 2019
For some simple consulting like this you don't need to do anything complicated like an LLC or an S-corp or get insurance. A simple sole proprietorship is fine.
What this means is you don't need to do anything at all. You don't even need a new bank account. You just have to keep records of all of your business income and business expenses. This should be pretty trivial for just a couple of clients at a time. You can just keep these records in a notebook or use a $30 copy of Quicken. You don't need Quickbooks. That is way to complicated and overkill.
For taxes you just tally up your business income and expenses on Schedule C. You can do this with a $30 copy of TurboTax. Or if you like, you can use an accountant for the first year just to see how it is done.
You need to find out if you are responsible business taxes to your local jurisdiction - state or city. In most cases there are exemptions for businesses below a threshold, say, $100,000. Or no business taxes at all.
posted by JackFlash at 10:17 AM on December 18, 2019
What this means is you don't need to do anything at all. You don't even need a new bank account. You just have to keep records of all of your business income and business expenses. This should be pretty trivial for just a couple of clients at a time. You can just keep these records in a notebook or use a $30 copy of Quicken. You don't need Quickbooks. That is way to complicated and overkill.
For taxes you just tally up your business income and expenses on Schedule C. You can do this with a $30 copy of TurboTax. Or if you like, you can use an accountant for the first year just to see how it is done.
You need to find out if you are responsible business taxes to your local jurisdiction - state or city. In most cases there are exemptions for businesses below a threshold, say, $100,000. Or no business taxes at all.
posted by JackFlash at 10:17 AM on December 18, 2019
Incorporating is generally only recommended as a freelancer if you are hitting a certain level of freelance income ($100k+ / year is the number I often hear cited) and the reasons for that have to do with payroll, liability, and tax stuff SOOO specific to your situation/work/state or residence no one here can really tell you - you need to talk to a professional tax or business lawyer (not just a 'bookkeeper' or CPA). The tax, payroll, and filing requirements are much, much more complicated, strict, and expensive ($800/yr minimum tax in my state). I wouldn't call the effort required for this process and the upkeep of it 'low effort' but that's because it varies by state and industry, and you need to talk to a professional lawyer/tax specialist in your state.
With that said... IMO as a full time freelancer for over a decade, if you have one project with one client and you have a day job, that's a sole propreitor (1099 freelancer) situation. I would not go out of my way to make this more complicated than it needs to be, unless you are thinking of quitting your day job to freelance full time in the very near future. Many freelancers never incorporate so it's not like having an LLC is some sort of necessity. I would take this as an opportunity to find a professional lawyer/tax specialist you like who you can ask for advice and can help you with tax filings and compliance issues. If your business grows beyond one client, they will tell you when it makes sense to incorporate or change the structure of your business.
To do business as a sole proprietor, you don't need to do anything really. You can file a "Doing Business As" or a "Fictitious Business Name" with your local authority if you want to use something other than your legal name to open accounts as. But really you just need to report your expenses/income on Schedule C on your taxes. That is your responsibility, it doesn't have to be complicated (or require software or separate bank accounts or whatever). Like I said, I would have a professional walk you through this at least the first year, but your situation is not terribly complicated.
Example contracts & SOW and things like that - I would look for a professional society / group of people doing similar work. Mine has literal books of boilerplate for all kinds of situations, tailored to my field of work.
I wouldn't stress over how to get paid, it's your clients responsibility to figure this out. Most of my international clients seem to prefer wire transfers, which I have never paid anything for on my end (unless there's a fee for currency conversion). My accounting software (Wave) allows me to accept credit cards online, the fees are cheaper than Paypal (I've never been paid by a client via Paypal by the way...).
posted by bradbane at 10:31 AM on December 18, 2019
With that said... IMO as a full time freelancer for over a decade, if you have one project with one client and you have a day job, that's a sole propreitor (1099 freelancer) situation. I would not go out of my way to make this more complicated than it needs to be, unless you are thinking of quitting your day job to freelance full time in the very near future. Many freelancers never incorporate so it's not like having an LLC is some sort of necessity. I would take this as an opportunity to find a professional lawyer/tax specialist you like who you can ask for advice and can help you with tax filings and compliance issues. If your business grows beyond one client, they will tell you when it makes sense to incorporate or change the structure of your business.
To do business as a sole proprietor, you don't need to do anything really. You can file a "Doing Business As" or a "Fictitious Business Name" with your local authority if you want to use something other than your legal name to open accounts as. But really you just need to report your expenses/income on Schedule C on your taxes. That is your responsibility, it doesn't have to be complicated (or require software or separate bank accounts or whatever). Like I said, I would have a professional walk you through this at least the first year, but your situation is not terribly complicated.
Example contracts & SOW and things like that - I would look for a professional society / group of people doing similar work. Mine has literal books of boilerplate for all kinds of situations, tailored to my field of work.
I wouldn't stress over how to get paid, it's your clients responsibility to figure this out. Most of my international clients seem to prefer wire transfers, which I have never paid anything for on my end (unless there's a fee for currency conversion). My accounting software (Wave) allows me to accept credit cards online, the fees are cheaper than Paypal (I've never been paid by a client via Paypal by the way...).
posted by bradbane at 10:31 AM on December 18, 2019
I am a consultant and a sole proprietor. I do business under my own name so I don't have a DBA. I did open a business checking account (it was free through my local credit union) for ease of tracking but it's not stricrly required.
Check to see if you need a local business license. My city requires a business license, it cost me $85 for two years. This is essentially a local business tax.
You will need to either file estimated quarterly taxes both federally and at the state level, or increase your withholdings at work. This is not just at your income tax rate but includes self-employment taxes as well.
posted by muddgirl at 1:26 PM on December 18, 2019
Check to see if you need a local business license. My city requires a business license, it cost me $85 for two years. This is essentially a local business tax.
You will need to either file estimated quarterly taxes both federally and at the state level, or increase your withholdings at work. This is not just at your income tax rate but includes self-employment taxes as well.
posted by muddgirl at 1:26 PM on December 18, 2019
This thread is closed to new comments.
1b. General liability insurance. You're similar to me in work type (meaning office/knowledge work) and I operate with physical equipment with a high value sometimes and a 1mil policy is like $475 a year. This is beyond worth it, to becoming a requirement. Effort level, a phone call or two. A few emails. Sign some forms. Maybe 4 hours Max over 2 days.
1c. If your so inclined (and id guess yes based on being a Salesforce admin) get some books software otherwise a low cost bookkeeper person. Assuming software: QuickBooks is standard. I use Zoho instead (for the life of me I can't recall why it picked it but it's fine). This does more than you think that you don't realize right now like easily track expenses, miles, create invoices (this was the WHY of why I got accounting software was I had no idea how to do this)
2. No. You're an independent contractor (meaning you are a business now for this transaction). Up to you to report income and expenses.
3. There's a wealth of information online. I staggered through and for example didn't use book keeping software so year 1 taxes were a lot of work. But I made no serious mistakes and I'm not a business guru or any kind of wunderkind entrepreneur. That said I DO absolutely use an accountant at tax time. She does my personal and business taxes and I can answer all her questions using my accounting software. Used to be $250 a year but she raised my rate to $400 last year. I don't care. She's great... AND (as I learned from her, bookkeeping or accounting from professionals is a write off expense anyway!!!!)
4. Seems like you have a good grasp of what you don't know from my perspective. One of my first big contracts was with a Belgian company so that's where the "get a bank account" comes from. It made it cleaner for foreign wire transfers which were free in a business account. The only other thing I've gotten better at is writing up my understanding of a given task or project in a kind of statement of work so that expectations are well and clearly understood from day 1. This, IMHO, is more critical when working with a foreign entity. You and they may have different assumptions so just writing it up is great.
One other thing. For awhile I just used my work laptop for everything. I didn't have a personal computer. I have now bought a low cost refurb laptop ($400 on eBay) and use that as my personal business machine. I also got ms office 365 and use both the OneDrive storage and office suite heavily. My company didn't care and are aware of the side consulting but I got to a point where I just didn't like it anymore. Felt better to be separate.
Other things that spring to mind but fall more into the fun stuff are making a nice logo, building a basic website, getting your you@yournewllc.com email address!!! Fun stuff!! (Although the email thing.... Not using a Gmail, Yahoo etc email address is an immediate sign of professionalism to those in the client org who do NOT know you....., So maybe that goes higher).
I'm happy to chat more, if you want memail me and we can set up an easier way to talk. I am proud of my small but growing business and happy to share!!!
posted by chasles at 5:03 AM on December 18, 2019 [1 favorite]