![]() ![]() ![]() All you need to do to become a sole proprietor is: Sole proprietorships are not registered with the state like other business types. However, most independent contractors are sole proprietors by default. Independent Contractors and Sole ProprietorsĪn independent contractor is not required to form a business structure around their work they can simply continue working as a contractor for as long as they desire. The reason most choose to form sole proprietorships is that they're the simplest business type to form in most states. Their choice will depend on their long-term goals for the services they offer and how many other people they want to get involved in their business. Most independent contractors choose to form a sole proprietorship for their work, but they can technically choose other types like: Independent contractors should keep a close track of their earnings throughout the year and tax percentages so they aren't surprised by what they owe. They'll be required to pay self-employment tax like Medicare and social security as well as personal income tax. A 1099 will not show any tax deductions, because independent contractors are responsible for paying their own taxes at the end of each year. W-2 forms show the various payroll taxes withheld from their pay, but an independent contractor doesn't pay those taxes. If a contractor does work for multiple companies or individuals, they'll receive multiple 1099s. A 1099 (as it's called for short) is a tax form that lists the total income paid to the contractor from a particular company for the year. Because independent contractors are not employees, they do not receive W-2 forms, but 1099-MISC forms instead. Usually, independent contractors are creative or technical professionals who specialize in a particular medium like web design, writing, or information technology, among others.Įmployees get W-2 tax forms each year that specify their yearly earnings and taxes withheld from their paychecks. Independent contractors provide work and services for others, but they are not technically employees. ![]() Both are business types, but an independent contractor is comprised of one person, or member, while an LLC can have one or more members. Independent contractor vs LLC refers to the differences between an independent contractor and a limited liability company. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |