Liability/Insurance considerations if hired by company as independent contractor (1099)?

[Bret Ford]

A former employer has offered to hire me on a part-time basis, essentially as an independent contractor (basically, they would like to give me a 1099 instead of a W-2).  Despite that, my understanding is that all work I do will be stamped by the boss/owner of the company, and not by me.  I have never been in business for myself before and this seems like a bit of a gray area.

How concerned should I be about my personal liability for any work I do?  Do I need to get my own professional liability insurance even though I won’t be stamping anything?  Or should I just insist on an employee classification and the W-2 that comes with it?  Thanks in advance for any guidance.

[Andrew Garulay, RLA]

If someone else is stamping it I would not be worried about insurance.

[Daniel Miller | RLA, LEED AP]

Just don’t stamp or sign anything and you’ll be fine.  You, individually, aren’t liable nor responsible for any work that goes out of the office that doesn’t have your name, stamp or signature on it.

[Jordan Lockman]

[Bret Ford]

I never thought it would be easier, but it’s the only arrangement they’re offering;  I’ll have to work with it if I want the experience.  You’re right about the extra taxes; it’s something most people may not consider, but I’ve factored that in. I intend to set aside a certain percentage from each check to cover all taxes at the end of the year.  Paying estimated quarterly taxes is also a good suggestion to help avoid the shock of a large tax bill come April. 

Thanks for the replies.

[nca]

Bret,

I have worked as a 1099 consultant for a number of la firms over the past few years and I prefer it. I have now moved on to becoming a completely independent entity/consultant. I have done lots of schematic design, illustration, construction packages, and illustration. All the replies are spot on–you shouldnt worry about liability if you are not stamping and you should be paid a rate commensurate with your level of experience PLUS more like 25% for taxes, insurance, expenses, etc. You should also look into a good bookeeping software like what I use–freshbooks.com. Its cloud based and will allow you to track expenses (which you will want alot of) and invoicing. You should be creating invoices with task descriptions for each project/task. If you are retained as an IC for an extended, regular basis for a single client this may throw up some red flags for your ‘client’ or at least their accountant as the govt may consider you an employee and demand they pay taxes and insurance for you. You just have to be very clear that you are using your own tools and working on your own time and ideally in your own space. Lots of employers are trying to put less experienced employees on the hook for taxes and insurance this way. If you dont budget for your taxes you could get yourself and your client in deep water.

[Robert Anderson]

Bret,

I have been working as a contractor for another firm for two years and have gone through this very same exercise. I’m very cautious about my liability and I can say that so long as you don’t seal or sign anything with the other firm you would be in no different a situation than if you were an employee. You would not be liable since that ultimate responsibility lies with the firm you work under.

Jordan makes a very good point about the taxes etc. If you are going to be contract with this firm I would set up your own LLC and negotiate not for 7-8% but significantly higher since you are essentially now running your own firm and they no longer have the overhead associated with paying you salary. The firm your contracting with should continue to bill you at you last billing rate and therefore should have plenty of cushion for profit without the expense of paying all the overhead associated with keeping you on as a full time employee. This includes but is not limited to your health insurance along with the FICA etc.

Depending on your circumstances I can also tell you that if you can get enough hours you might just find that having your own time and schedule is very liberating. Best of luck to you!

[Bret Ford]

I understood LLC’s as a means to protect personal assets from creditors. Since I will not have any debt or creditors, what is the advantage of establishing an LLC in this situation?

[Robert Anderson]

Limited Liability Corporation is just that. It would protect your assests in the event something went wrong with a project. If you would rather not set up a LLC you could create a sole proprietorship just as easily.

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