Perceptions of freelance consultant vs. small business

June 23, 2005 8:24 PM

What are the perceptions of freelance consultant vs. small business in contracting work?

I have made a decision to work from home for the next 12 months or so.

When looking for new clients is there a general perception that hiring a small business (even if that business only has 1 - 2 employees) would be better than a single person? Is it easier for companies to pay out to a company vs. a consultant? Will I generally have more luck (all other things being equal) gaining new work if I was Me Inc. vs. just me?

I would like to avoid registering a company as where I live it requires a significant capital expenditure. For me personally, other than ego, I see no point in forming a company - I would form teams around freelancers anyway and would never have more than myself and an assistant as employees.

posted by cmacleod to Work & Money (3 answers total)

There may be significant tax breaks afforded to small companies which you won't get as a freelancer - this is certainly the case in the UK. Don't know about Taiwan, though. Probably safest to speak to an accountant; they may give you a 1hr free consultation.
posted by blag at 4:00 AM on June 24, 2005

My experience is that it depends on who you expect your clients to be. Giant corporations seem to treat you better if you are a company. Nobody else seems to care.
posted by spilon at 11:20 AM on June 24, 2005

Best answer: In my experience (I've worked as both an unincorporated contractor, and as a sole-proprietor corporation, for US-based clients only), for 99% of the clients, it makes no difference whatsoever. They're hiring you because of your unique skills; the legal framework under which you're selling those skills is pretty much irrelevant. Worry more about your portfolio and your salesmanship than about whether you have "Inc." after your name.

That last 1% are going to be large corporations who are mandated to work only with incorporated vendors from a list of vetted, "approved" companies. Even if you are a business rather than a solo contractor, it is extremely (and deliberately) difficult to get onto that list without a personal connection or some other sort of back-door "in" -- basically, if you don't already have a line on this sort of thing, it's not going to be relevant to you. (This is by no means all, or even most corporations. Just a very small subset have this sort of requirement in place. It's to their detriment, I believe, but then I'm obviously biased.)

If you do enough subcontracting to the same people that it would be worthwhile to hire them as full- or part-time employees, then yes, it may be worthwhile to incorporate and jump through all the withholding and disability and health insurance hoops. (Be aware that the filing fees for incorporating are just the tip of the iceberg -- in the US, at least, the tax and insurance requirements are extremely complicated and time-consuming.)

Otherwise, just file a DBA and skip the hassle.

b1tr0t, perhaps you should reconsider whether you should try answering questions about which you have zero knowledge. Just a thought.
posted by ook at 8:18 PM on June 24, 2005