Skip Incorporating As A Freelancer Unless Your Accountant Tells You To

Freelancing itself is a bold venture, and to many, the idea of creating your own business entity around it feels both proper and very cool. One experienced self-employed contractor suggests skipping the expensive process, however, unless you've got a specific business case.

Michael Koretzky at the Money Talks blog notes that he did incorporate — to the tune of $US600 plus annual upkeep payments — but only because he had a big job that required sub-contractors and the resulting tax confusion. If he had to do it again, though, he'd think twice:

You can also Google it and find dozens of websites offering conflicting advice. My own advice is simple: Talk to your accountant and incorporate only if it helps your bottom line. I admit I did it partly because I thought that's what all successful freelancers do. It's the freelancer's vanity, sort of like a Porsche for a middle manager.

There's also a general perception that incorporating as a freelancer shields you from all liability and lawsuits relating to your business, but from this editor's perspective, it's often worth reading up on just how much you're still exposed to before you hand over some serious money for small comfort.

Have you incorporated as your own freelancing entity and find the cost worth it? Know of a lower-cost way of distinguishing your practice? Tell us the tale in the comments.

10 Tips for Working for Yourself – without Working Yourself to Death [Money Talks News]


Comments

    Does this have anything to do with Australia? A bit more filtering might be useful.

      Freelancers in Australia do indeed have the choice of working as a sole trader or incorporating as a company -- and doing the latter definitely doesn't make sense without advice from an accountant.

    I'm a freelancer and incorporated as a company, the tax benefits for my particular situation are amazing, I only wish I'd done it sooner. Talk to several accountants, my previous accountant told me it wouldn't be worth my while, I only had his opinion and therefore paid more tax than I needed to for at least a year before I received better advice from my new accountant. Lesson: get more than one professional opinion, you might kick yourself otherwise.

    even as a freelancer with a company all the money you may earn may end up being pesonal service's income and not be taxable in the company.

      Woodsdog, I think you've nailed the key issue. Before you even consider having a company, bone up on the ATO definition of personal services income. It's right there on the ATO site, and no trip to the accountant is needed at this stage.

      Employers in Aust have little incentive to offer you company status - it's a whole extra section on the BAS and tax return - unless it's a small employer who doesn't want any employees. Once they have one employee, it's little extra work to have 10.

Join the discussion!

Trending Stories Right Now