Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants

396 Pages·2008·3.49 MB·English

by  Fishman S.

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7th edition
Working for
Yourself
Law & Taxes for Independent
Contractors, Freelancers &
Consultants
By Attorney Stephen Fishman
Seventh edition february 2008
editor alayna Schroeder
cover design SuSan putney
production Margaret livingSton
proofreader eMily K. WolMan
index ellen Sherron
printing conSolidated printerS, inc.
fishman, Stephen.
Working for yourself : law & taxes for independent contractors, freelancers &
consultants / by Stephen fishman. -- 7th ed.
p. cm.
iSbn-13: 978-1-4133-0752-8 (pbk.)
iSbn-10 1-4133-0752-3 (pbk.)
1. independent contractors--legal status, laws, etc.--united States--popular
works. 2. independent contractors--taxation--united States--popular works. 3.
Self-employed--taxation--law and legislation--united States--popular works. i.
title.
Kf390.i54f57 2008
343.7305'26--dc22
2007035517
copyright © 1997, 1998, 2000, 2002, 2003, 2004, 2006, and 2008 by Stephen fishman.
all rightS reServed. printed in the u.S.a.
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Acknowledgments
Many thanks to:
barbara Kate repa, Janet portman, amy delpo, lisa guerin, Stephanie bornstein, and alayna
Schroeder for their superb editing.
Malcolm roberts, cpa, for reviewing the tax materials.
gary gerard for sharing his experiences as an independent contractor.
The many independent contractors throughout the country who permitted me to i nterview them.
ellen Sherron for the helpful index.
emily K. Wolman for thorough proofreading.
Margaret livingston for diligent production work.

Table of Contents
Your Legal Companion for Working for Yourself ................................1
1 Working for Yourself: The Good, the Bad, and the Ugly ..............3
Working for Yourself: The Good ........................................................................................4
Working for Yourself: The Bad .............................................................................................5
Working for Yourself: The Ugly ...........................................................................................7
How to Use This Book .............................................................................................................8
2 Choosing the Legal Form for Your Business .............................................9
Sole Proprietorships ...............................................................................................................10
Corporations ..............................................................................................................................15
Partnerships ................................................................................................................................30
Limited Liability Companies (LLCs) ...............................................................................31
3 Choosing and Protecting Your Business Name ..................................37
Choosing a Legal Name ........................................................................................................38
Choosing a Trade Name .......................................................................................................38
Choosing a Trademark ..........................................................................................................42
Choosing an Internet Domain Name ...........................................................................45
Conducting a Name Search ...............................................................................................45
4 Home Alone or Outside Office? ........................................................................47
Pros and Cons of Working at Home ..............................................................................48
Restrictions on Home-Based Businesses .....................................................................51
Deducting Your Home Office Expenses .....................................................................55
Pros and Cons of an Outside Office ..............................................................................63
Leasing a Workplace ..............................................................................................................63
Deducting Your Outside Office Expenses ................................................................65
5 Obtaining Licenses, Permits, and
Identification Numbers .............................................................................................69
Business Licenses ......................................................................................................................70
Employer Identification Numbers (EINs) ...................................................................71
Sales Tax Permits ......................................................................................................................72
6 Insuring Your Business and Yourself .............................................................75
Health Insurance ......................................................................................................................77
Disability Insurance ................................................................................................................87
Business Property Insurance ..............................................................................................88
Liability Insurance ...................................................................................................................90
Car Insurance .............................................................................................................................92
Workers’ Compensation Insurance ...............................................................................93
Other Types of Insurance ....................................................................................................94
Ways to Find and Save on Insurance ............................................................................95
7 Pricing Your Services and Getting Paid ......................................................99
Pricing Your Services ............................................................................................................100
Getting Paid ..............................................................................................................................107
8 Taxes and the Self-Employed .............................................................................123
Tax Basics for the Self-Employed...................................................................................124
IRS Audits ..................................................................................................................................131
Ten Tips to Avoid an Audit ..............................................................................................134
9 Reducing Your Income Taxes .............................................................................137
Reporting Your Income ......................................................................................................139
Income Tax Deduction Basics .........................................................................................141
Business Use of Your Home .............................................................................................150
Cost of Business Assets .....................................................................................................150
Car Expenses ............................................................................................................................155
Travel Expenses .......................................................................................................................160
Entertainment and Meal Expenses ..............................................................................163
Health Insurance ...................................................................................................................164
Start-Up Costs .........................................................................................................................165
10 The Bane of Self-Employment Taxes ...........................................................167
Who Must Pay .........................................................................................................................168
Self-Employment (SE) Tax Rates ...................................................................................168
Earnings Subject to SE Taxes ...........................................................................................168
Computing SE Taxes.............................................................................................................169
Paying and Reporting SE Taxes .......................................................................................170
Outside Employment ..........................................................................................................170