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You mean public corporations. Homie with the dog hair clipping business whose a registered S Corp doesn't have shareholders in the sense that would fuel such irrational and cut throat thoughts.
If he is intelligent, he still wants to maximize profit, not run a commune.
Some industries are based on a majority of freelance/contract work- creative and computer industries, for instance. These are not low-paying or low-skilled gigs.
There was a protest at the oscars this year specifically to draw attention to this serious issue of contract work and lack of job security in the VFX industry.
The IRS recently busted a lot of these businesses for hiring "perm-lancers" (contractors who work at the same office for years- they are employees in everything but name). Perm-lancing is illegal. Instead of hiring anyone or giving benefits as the IRS intended, the companies forced the freelancers to incorporate themselves, or they wouldn't hire them at all. That's an extra $1000/yr in taxes for those freelancers. Freelancers now face the prospect of having to pay an additional $600 month or so on health insurance next year, or pay the penalty, which many will, because it will be cheaper.
How on Earth will this possibly get any better?
I think you're confusing length of time working for an employer with type of work done by the contractor. It's not illegal to hire someone as a contractor for along period of time. I suspect that the IRS had a problem with those contractors doing work that deemed them employees, not contractors. How long they worked there is irrelevant.
As for incorporating, that's a company's prerogative. They can hire a contractor or not. That's why it's "contract" work, not employment. When you do contract work (freelance) you know you're responsible for health insurance, etc.
I think you're confusing length of time working for an employer with type of work done by the contractor. It's not illegal to hire someone as a contractor for along period of time. I suspect that the IRS had a problem with those contractors doing work that deemed them employees, not contractors. How long they worked there is irrelevant.
As for incorporating, that's a company's prerogative. They can hire a contractor or not. That's why it's "contract" work, not employment. When you do contract work (freelance) you know you're responsible for health insurance, etc.
Yes and no.
Yes, the IRS busted the shops for this system of perm-lancing, because the freelance artist contractors were working in the manner of employees. That is what perm-lancing means. A permanent freelancer. Not a long-term contract. Permanent.
No, I'm not confused.
The small shops (by that I mean corporations with 100 people or less working in the office, usually around 1/4-1/3 are staff) were having freelance artists who get paid Day Rates -more than half the workers in the office- come into an office, sit at the same desk and work m-f for years like an employee. This is perm-lancing.
Shops busted for perm lancing told the freelance contractors who had been working for them for years as Sole Proprietors to incorporate themselves or take a hike. This is how the artists end up with extra tax burden, because the CA corporate tax is 15% of your profits; more than the 12% self-employment tax.
2 or 3% is a lot, as most FX workers I know bring in around 100k, give or take 30k depending on the weather, and expense/write offs are generally less than $20k. Usually 10kish. Day rates range from $200/day for newbies, to north of $800/day for advanced CGI like particle simulations (which requires physics, engineering and programming knowledge). Average $400-$600/day.
Maybe we have a really crappy CPA- I'm starting to think so now after reading this thread.
People saying "I'm a contractor" tells nothing about what that person does for work. There is no "type of work" that defines a contractor. It's just a way to get paid.
Shops busted for perm lancing told the freelance contractors who had been working for them for years as Sole Proprietors to incorporate themselves or take a hike. This is how the artists end up with extra tax burden,
because the CA corporate tax is 15% of your profits; more than the 12% self-employment tax.
SE tax and state corporate income tax have nothing to do with one another and SE tax is not 12% and CA corporate income tax is not 15%. It's cheaper to incorporate for some high-income individuals as the corporate tax rate is lower than the individual tax rate.
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People saying "I'm a contractor" tells nothing about what that person does for work. There is no "type of work" that defines a contractor. It's just a way to get paid.
No, that's why the IRS has their laundry list of criteria to determine if you're really a contractor. There's no "type" of work, but the manner in which you perform the work is what determines whether one is a contractor or an employee. Lots of people are illegally paid as contractors when they are in fact employees. Eventually the IRS catches on and brings down a bunch of pain.
Most business also go through a money-losing start-up period. Three to five years is pretty typical. You set up a company within an S-corp and write off the start-up period against other businesses that are turning a profit.
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