Is it better to be in business on your own or to work for an employer?
This question may be asked as individuals are seeking to make a career choice. The answer is not an easy one. There are many factors to consider. First, what will your salary be as an employee compared to what you will earn as an independent contractor? But it’s not just about the money that you earn, due to tax implications and benefits that an employer may offer, you have many other options to weigh. Let’s take a closer look at some of these factors:
- An employee will be able to obtain subsidized benefits than an independent contractor cannot. Employer subsidized health, life, disability and retirement benefits are some of the benefits that an independent contractor will have to pay at 100%.
- An employee only has to pay the employee part of FICA, Medicare, etc. An independent contractor must pay the higher self-employment tax.
- An employee does not have the same tax advantages as the self-employed for business expenses. While unreimbursed employee business expenses are limited in deductibility, the independent contractor can write off all reasonable and necessary business expenses.
- An independent contractor will have start-up costs, the employee will not.
- Independent contractors will often have office expenses such as paying for office space, equipment, office supplies, etc. An employee will not be responsible for any of these costs.
- An independent contractor may have staffing responsibilities, the employee will not.
- An independent contractor does not have a set schedule or any required hours, an employee usually has both.
These are only a few of the factors that have to be considered and it’s not an easy choice. To make your decision easier you can look at this way:
Employee (Salary) – part of a team and not responsible for operational decisions
Independent Contractor – be your own boss and responsible for the operational decisions that you are making
While there is no right or wrong answer, only you can decide what career path is that you want to follow.