May have an opportunity to work for a defense company starting this summer.

Financially is it better to become a "consultant" and create your own business LLC?

or better to become a full time employee where you have a boss in that other company?

taking into account taxes, salary, and ability to procure equity.

thanks.

Agree not enough here to offer real help.

At it's most basic, I would say your decision would come down to how much you want to hedge your downside risk at the expense of your upside potential.

If you want uncapped upside, then you're going to have to take on significant downside exposure...personal asset guarantees, significant time sacrifice, reputational risk, capital at risk, etc. To what degree you would have the ability to operate administratively within DFARs without additional expense/help - I don't know.

If you want limited exposure, you'll trade that for upside potential. Use the company's money, use the company's backoffice, get paid nicely, sleep at night, etc.

If you have the ability to expand and hire consultants to work for you and grow your customer base, then that is in favor of not working for a company. If not, I'd side with working for a company.

If you have a family and need consistent income, I'd side with working for a company.

I've been in both scenarios. Positives and negatives to both scenarios but the key is "can you grow it" beyond a simple independent contractor role.

Edit: maybe I'm reading this wrong…are you asking if you should set up a LLC or act as a sole proprietor?

Proposition Joe said:

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Not near enough information to give any usable advice.

How long on the job? Would the consultancy last as long as the regular employment?

401k match? Stock options?

Just from a tax standpoint you're likely better off as an employee.

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Thanks

would probably be 1-2 years at first and by that time I can likely early retire anyway

I will need to come up with what I want first, and then negotiate with the employer. so I want to know what my options are

can a consultant have a 401K match or equity? That sounds hard to believe

birdman said:

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You should consider health insurance costs. If you are strictly contract work, insurance is ridiculous.

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thanks- that is a good argument to become an employee

It is a foreign based company wanting to expand into the USA so would need me to help set up all their legal compliance programs.

in the defense sector.

so how can I maximize equity with a company which they believe will be bought up by a large American defense contractor

You can have a 401k as a consultancy/LLC, but there's no company match to it -- which if you're gaming out what is going to give you a better ROI that can be very significant.

LMCane said:

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Proposition Joe said:

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Not near enough information to give any usable advice.

How long on the job? Would the consultancy last as long as the regular employment?

401k match? Stock options?

Just from a tax standpoint you're likely better off as an employee.

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Thanks

would probably be 1-2 years at first and by that time I can likely early retire anyway

I will need to come up with what I want first, and then negotiate with the employer. so I want to know what my options are

can a consultant have a 401K match or equity? That sounds hard to believe

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You can do a SEP instead of a 401k.

As someone else said, I would highly factor what health insurance is going to cost. If you still plan to have it, whether your consult or go FTE then it could matter if you are only going to do this 1-2 years.

I believe you are around my age (I'm 52). If you use a private broker for private insurance, you are likely going to pay $800-1000 per month (on the cheap end), so you are looking at $20-24k over two years out of pocket vs what is likely way, way cheaper if you go FTE.

When you consult, your rate card as a consultant should factor all of this and should be a higher rate than what you would get as an FTE because the employer is not providing all of the added benefits. So, you could offset some of the higher self-insurance costs because your rate will be higher as a consultant, but it depends on how high you can charge to offset vs just going straight FTE.

I would want to see the full compensation package from employer before you do anything. Then you do the math and that vs what you would charge as a consultant. And then it becomes how confident you are on the rate you can get as a consultant.

birdman said:

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You should consider health insurance costs. If you are strictly contract work, insurance is ridiculous.

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This. And don't forget PTO. I took a day rate contractor position and taking week long vacation hurt the bank account

uneedastraw said:

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If you have the ability to expand and hire consultants to work for you and grow your customer base, then that is in favor of not working for a company. If not, I'd side with working for a company.

If you have a family and need consistent income, I'd side with working for a company.

I've been in both scenarios. Positives and negatives to both scenarios but the key is "can you grow it" beyond a simple independent contractor role.

Edit: maybe I'm reading this wrong…are you asking if you should set up a LLC or act as a sole proprietor?

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Thanks-

the issue is do I go to the foreign company which is seeking to set up shop in the USA and tell them I want to be:

1. a full time employee of the company

2. or a "consultant" which would be an LLC.

also the fact I am an attorney with Bar Membership I believe means additional escrow accounts (and in the case of DC Bar setting up a PLLC)

I want to be able to work remotely closer to Texas (my parents are still alive) and also get some equity as this company will likely be bought out by a major American defense contractor

I can't imagine a company giving equity to a contractor.

Has the company given you both options? You might be wasting time on something that isn't even a option.

birdman said:

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You should consider health insurance costs. If you are strictly contract work, insurance is ridiculous.

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We are about to run out of COBRA after my husband retired. I am self-employed. We thought we'd get a policy through the marketplace. OMG. What a disaster. $50K for the policy that best suits us, and only TWO of our family's doctors accept the policy. Texas Children's Hospital and Texas Children's Pediatrics offices do not accept it. No urgent care facilities near us take it. And that terrible policy will cost us $48K/year. The cheapest policy I found was about $38K/year. You don't want to deal with the hassle and cost of obtaining health insurance through the marketplace. If you can get coverage through your spouse, then that is a great option.

Also, depending on what you do for the company, you likely can't just decide to be a contactor OR an employee. There are legal definitions for each. These are dependent on where you work, who controls your work, who decides how to complete your projects, if you work for other companies, etc. Do a Google search... Google AI gave a fairly accurate description.

Great advice

Just turned 55.

planning on working another 2 years.

seems to be from the assembled knowledge best just to go FTE and hopefully they will agree to me working mostly remotely.

birdman said:

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I can't imagine a company giving equity to a contractor.

Has the company given you both options? You might be wasting time on something that isn't even a option.

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They are Israelis so everything is amorphous until the last minute.

there is no firm offer, just discussions and seems they want to bring me on board (their consultant says I am their top choice)

so I just want to know my options before they say: "do you want to be a contractor or employee and when can you start?"

What's the product and are any ID10T forms involved??