You don't necessarily need to create a legal business in order to take advantage of many of the strategies I discuss on this site. There is technically nothing wrong with billing clients and accepting payments as a sole proprietor. As an example, I used to casually work as a real estate agent in Chicago. My broker paid commissions directly to me as a contractor, and issued me a 1099 at the end of the year. I still got to take advantage of relevant business expenses, but it didn't seem worth my time to invest in creating a company.
However, if your
contracting role is significant or it is your primary source of income, you
will find several benefits to creating a legal business. For example, you can:
- Limit your legal and financial liability associated with business operations
- Easily separate business financial activity from personal by opening separate accounts in your company's name
- Build credibility with prospective clients
How about protecting
yourself from debts incurred by your company?
Taking out a loan in your businesses name and not being held personally
responsible for it sounds great, right? Well don't count on it. You will probably
have to personally guarantee any credit that is issued in your company's name.
Happy contracting!
Jim Roberts