To Contract or Not To Contract



  • I have worked as a Software Developer/Engineer for about 7 years now. All of that time has been as an FTE. I am inherently not a risk-taker and have shied away from the idea of doing Contract work.

    Now, I am wondering if I am reaching my full potential sticking with FTE jobs. Both professionally and financially.

    So, my overly generic question(s) are...

    • What are the benefits/drawbacks of contract work in Software Development?
    • What is the best way to go about finding Contract work?
    • What are the pitfalls I need to look out for?
    • Do I need to set up an LLC in order to be hireable as a contractor? If I don't NEED to, should I? Why?

    I would really love to hear from people who have done both as well as people who have done only contract work.

    Thank you in advance for all responses.

     



  • This only applies in the US (New England/Mid-Atlantic areas).

    You don't need to have an LLC in order to be hireable; you would be what's known as a 1099 employee (for the IRS form that's filled out). You'll be responsible for your own health insurance and you'll have to pay all of your Social Security and Medicare taxes as opposed to just half - your employer currently pays the other half. You'll also need to supply your own health/dental/life insurance. I don't know of any compelling reason to set up an LLC for a one man operation, but I don't know much about that kind of law.



  • After having just dumped being a contractor for 3 1/2 years I can actually answer some questions:

    First of all you need to be a salesperson. As if you can't sell or negotiate then you won't get any work. That means marketing to some degree as well. Some people coming off FTE can leverage contacts to help you jump start this, but YMMV. But even still you need to network, network, network and then network some more - user groups, small business associations etc. And if you aren't working then you aren't earning and should be marketing.

    You don't need an LLC, but I have run into companies that will only pay into a commercial bank account. So you need something for that and an LLC is probably the minimum. But I would recommend an LLC to help you separate work finances from private finances. The LLC also helps shield your private assets from the company. In VA it cost me $100 and less than 1 hours of paper work to set one up. Go google for NOLO .. they have lots of great books on the subject. also you may need to get a business license from your local county/city - again trivial to do but it requires some legwork

    You will have to pay estimated federal and state taxes quarterly. I also had country taxes once a year.

    Depending on the industry you may need to (or should) carry indemnity insurance - even for driving your car when going to see a client

    The usual thing about getting a good accountant and having legal advice on tap. It may cost but it is worth the money (and is deductible)

    One down side that I encountered was that in doing lots of small jobs I was continually working at the same level of expertise. There is no career development as such.

    The good side is all those toys just became cheaper because they were "business expenses" .. lol

    Good luck with it though - it is better than FTE when it works, but sucks more than FTE when it doesn't



  • @OzPeter said:

    First of all you need to be a salesperson. As if you can't sell or negotiate then you won't get any work. That means marketing to some degree as well. Some people coming off FTE can leverage contacts to help you jump start this, but YMMV. But even still you need to network, network, network and then network some more - user groups, small business associations etc. And if you aren't working then you aren't earning and should be marketing.

    +1

    If you're already frequently getting proposals you could do as a contractor, you're on the right track. If not, you'll need a really good agent, but there's no real substitute for good networking.

    Even then, make sure you have a bit of a buffer set up. If it takes you a couple months to land a nice job, and it takes them some time to process the invoice, you're suddenly looking at months of no income and loads of expenses you now have to pay for yourself.



  • I agree with everything written so far.  I would add

     

    1)  I have a "DBA" setup.  This is short for "Doing Business As".  I filed it with the county I live.  I had to do this for tax reasons, and for the local Chamber of Commerce.  It lets me file a "Schedule C" tax return.

    2)   Health insurance - this costs an obscene amount of money.  If you are married to a woman with health insurance, you are in a great spot.  If you have to purchase it, you will get sticker shock.  I joined the Chamber of Commerce because they could get me a better rate.

    3)  Salary - The rule of thumb is you need to make twice the money you made as a Full Time worker to break even.

    4)  If you go through someone to get work, it is likely they will screw you over.  They might bill you out at $125 an hour and pay you $25 an hour, so you need to know what you are worth per hour and get it.

     

    I would look for contract work while you are still working full time.  If it is easy to come by and pays well, then quit the full time job.

     



  • Full Time Employee is job security. At least in this country.


Log in to reply
 

Looks like your connection to What the Daily WTF? was lost, please wait while we try to reconnect.