[IxDA Discuss] Experiences with Incorporation for Contract Corp to Corp "Interaction Design" work

[dnp607]

Hi Rich,

I'll jump in with some random experiences from an S-corp I've run.  
Hope it helps.

>
>   How difficult was it to file corporate taxes?
>

It's not difficult if you get a good accountant. If you are in  
California, I'll be happy to put you in touch with mine - she's  
amazing. There are some considerations.. For one, you'll want to hold  
and keep accurate and up-to-date minutes of shareholder(s) meetings.  
It's wacky, especially for a small LLC or S-Corp, but those are the  
rules... In California, I was diligent in filing the DE-99 forms for  
all payroll, and eventually needed to contract a payroll company to  
keep things flowing after obtaining a third employee. There was just  
too much paperwork to do it all myself. Without employees, the  
situation became much more manageable.

>   What were the biggest problems with incorporation?
>

For me, it was the paperwork and the worry about being audited.  
Keeping receipts, filing payroll, filing quarterlies, keeping my  
quickbooks accurate... Also, keeping all of my business and personal  
finances separate was initially a difficult, but ultimately  
manageable challenge.

>   What were the biggest problems after incorporation?
>

Nothing was really that problematic - I was lucky to have a good  
accountant who walked me through the process. Just keep on top of  
those records. Quickbooks was quite a help.

>   Other things to consider?
>

Consider the amount of money you intend the corporation to bring in  
initially, and how many actual on-the-books employees you intend to  
have. In my case, an S-Corp was much easier and less expensive to  
cope with than an LLC for the intended goal. Again, an accountant can  
help you decide. Also, several accountants told me that incorporating  
in Delaware was not a real benefit, and may actually cause more  
issues than it was worth. I no longer have the data to back that  
statement up, but you should talk with someone before incorporating.

All in all, I would say incorporating was of great fiscal benefit to  
me. I was able to recoup many of my business expenses, and the tax  
benefit was truly worth the time and effort. Additionally, I gained  
valuable knowledge on the process of what really goes into running a  
small corporation.

For the initial incorporation, you might want to consider just using  
a local company to help you file your articles - it is much more cost  
effective. Online "filing" companies try to sell you a ton of extras  
that you don't need, and have high prices... For instance, it cost me  
1100.00 to incorporate with an online service, when it could have  
cost 350.00 locally. It's really not that complicated to file  
articles of incorporation - but I'm wasn't savvy in that respect, and  
didn't want to worry about it.

>
>
> What are other's experience with incorporating for consultancy  
> work, and are
> there any things to watch out for or items to consider before hand?


Many companies will also require you to provide proof of insurance in  
order to work corp-corp, so you'll want to contact a good business  
insurance company to be ready for that. "The Hartford" helped me  
sufficiently.

I believe that the protection from liability (protection of my  
personal assets) and tax benefits made this worth my time and effort.  
Also, many companies would only allow corp-corp for their consultant  
gigs, and once was on their "registered vendor" lists, it became much  
easier to land further contracts. Sun Microsystems, for instance, was  
a great example. They had the corp-corp thing down to a science, and  
were wonderful to do business with. Your mileage will vary.

Good luck,

-Dan

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Dan Peknik, Industrial/Interaction Design
San Jose State University * NASA Ames
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