Moonlighting - get paid as 1099 vs single member LLC?

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tiburblium
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Moonlighting - get paid as 1099 vs single member LLC?

Post by tiburblium » Fri Nov 15, 2019 7:16 pm

Hi all,

An old contact has reached out with a moonlighting opportunity that would pay around $2,000 a month. I already have a full time job and this would be my first "side hustle", the time commitment would be very low and flexible. I have already received written approval from my current employer that they are ok with this, now I'm wondering what else I should do before I get started.

He offered to pay me as a 1099 contractor, but I was thinking I would create a single member LLC and do business through this instead.

LLC plan:

- Create single member LLC
- Get EIN for LLC and use this to register a bank account for the LLC
- LLC gets paid every 30 days
- Take quarterly distributions of the profits (document these in google sheets). Issue check to my personal account for 100% of account balance

Is this a reasonable plan? While an LLC is very easy to create in my state (GA), I am not sure if all this extra effort is warranted for what just be software for hire work. That said, I am a paranoid person and like the idea of liability protection.

I appreciate your thoughts and advice on this!

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jhfenton
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by jhfenton » Fri Nov 15, 2019 7:19 pm

For tax purposes, your single member LLC won't change anything except the name and EIN you put on your Schedule C. It will be disregarded entity for federal income tax purposes, and it won't matter how many profits you distribute to yourself.

But I would set up the LLC for liability purposes and ease of record-keeping. Just make sure to respect the formalities and the existence of the LLC if you want the limited liability.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Fri Nov 15, 2019 7:38 pm

This is a common misconception.

A single member LLC provides little to no liability protection for the personal acts of the owner. Providing software development services for a client is the very definition of personal acts not covered by the liability protections of an LLC. You have the same liability a sole proprietor would have. You should still have liability insurance.

In such a business, any credit obtained will almost certainly require a personal guarantee. This will negate any creditor protection that an LLC would provide. Without any liability or creditor protection. An LLC is unnecessary, provides no benefit and can be counter-productive.

Cyanide123
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Cyanide123 » Fri Nov 15, 2019 7:38 pm

Yeah there is absolutely no difference between being a sole proprietor as 1099 vs having your sole proprietor llc. You'll be taxed the same, unless you pick S corp taxation for the llc which allows distribution income as you suggest. But 24k a year is not even close to what someone should be making for them to switch over to s corp where you can do distribution income. You need to have at least 100k in distribution income plus a "reasonable salary" for you to consider s corp taxation and any tax benefit. Otherwise the complexity of s corp, having to do payroll, will eat up any benefit.

On a side note, if you formed an LLC, you limit your liability minimally and separate business from personal assets. That is the only benefit. Nothing else basically, everything else you can do as a 1099 sole proprietor.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by 6Pack » Fri Nov 15, 2019 7:43 pm

I’d go forward as a sole proprietor. I’m fact, for my side hustle, I’m a sole proprietorship.

Don’t forget to set up a SEP IRA for your side hustle. The contribution limits for Roth/traditional IRAs and 401(k)s are all different, so you could max them all out each year.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Fri Nov 15, 2019 7:53 pm

Cyanide123 wrote:
Fri Nov 15, 2019 7:38 pm
Yeah You'll be taxed the same, unless you pick S corp taxation for the llc which allows distribution income as you suggest. But 24k a year is not even close to what someone should be making for them to switch over to s corp where you can do distribution income. You need to have at least 100k in distribution income plus a "reasonable salary" for you to consider s corp taxation and any tax benefit. Otherwise the complexity of s corp, having to do payroll, will eat up any benefit.
If the OP's primary employment W-2 Social Security (SS) wages + moonlighting business profits * 92.35% is > the SS Maximum Taxable Earnings (MTE). Having an S-Corp will be counter-productive. They will pay more in effective FICA taxes than they would pay in SE taxes.[/quote]
On a side note, if you formed an LLC, you limit your liability minimally and separate business from personal assets. That is the only benefit. Nothing else basically, everything else you can do as a 1099 sole proprietor.
As I already pointed out, I don't know why so many people continue to think this. An LLC does not provide any protections for the vast majority of cases of 1099-MISC Income.

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tiburblium
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by tiburblium » Sat Nov 16, 2019 8:04 am

Thank you for the feedback everyone, so as Sprit Rider stated it seems there is no real advantages for me to form a single member LLC as it would not give me an additional liability protection for work that I would be doing myself vs being paid as a 1099 contractor.

I will move forward with getting paid as a 1099 contractor unless there is something else i should consider. For what it's worth, I will be getting paid to contribute and manage an Open Source software project.

I am also very interested in taking advantage of new tax shelters that become available to me with this self employment income.
For context, this is my situation:

Background:

Full time job, W-2 income: $200,000/year
Side Hustle: $20,000/year (estimate)
Married filing jointly, single income household.

Proposed 2020 tax shelter contributions:

Employer 401k: $19,000 + $12,000 employer match
non-deductible Trad IRA contribution->Roth IRA conversions: $12,000
HSA: $7,000
SEP-IRA: $5,000 (25% of 1099 earnings is the max contribution right?)

It looks like the contribution limits for Roth/Trad IRA are not linked to SEP-IRA, so I could contribute to both. What about a SOLO 401k instead? My understanding is that solo 401k and employer 401k contributions are considered in aggregate, so because I max my employer 401k plan I don't believe I would be able to benefit from a solo 401k, is that right?

Thank you!

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JoMoney
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by JoMoney » Sat Nov 16, 2019 8:19 am

FWIW, I briefly did side work where my primary customer essentially required me to form an LLC as it would only contract with a business entity. My understanding was that it protected them from claims that I was an employee. The LLC was of no benefit to me, it was actually a liability requiring filing of various documents, and the state of California has an annual LLC "Franchise" Tax
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Tamarind » Sat Nov 16, 2019 8:21 am

tiburblium wrote:
Sat Nov 16, 2019 8:04 am
It looks like the contribution limits for Roth/Trad IRA are not linked to SEP-IRA, so I could contribute to both. What about a SOLO 401k instead? My understanding is that solo 401k and employer 401k contributions are considered in aggregate, so because I max my employer 401k plan I don't believe I would be able to benefit from a solo 401k, is that right?
The limits on the employEE side of 401ks are linked. If you are maxing out your current employer plan you can't contribute more. However the employER side could still take the contributions that are currently going to your SEP-IRA. A few notes:

For a sole proprietor (or LLC) the profit sharing contribution limit is NOT 25%. It's about 20% (via some slightly complicated math as Spirit Rider shows).

The profit sharing contribution limit is shared across SEP IRAs and solo 401ks for companies controlled by the same person. So you can split your 20% across these but you don't get extra and there's no benefit to maintaining both.

So why might you want a solo 401k rather than just keeping your SEP IRA? Two reasons: 1) If you ever lost access to an employer 401k the solo would let you keep doing the $19k employee side. 2) If your income is high enough that you cannot directly contribute to a Roth IRA, which it is.

The SEP IRA will make you pay extra taxes on the conversion of non deductible IRA contributions to Roth IRA. If you haven't been through a full year with SEP IRA, this night have come as an unpleasant surprise. You can fix this by opening a solo 401k that will let you roll your SEP-IRA into it (careful, not all providers will do this) and getting the balance in all traditional/SEP IRAs to $0 before Dec 31.

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tiburblium
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by tiburblium » Sat Nov 16, 2019 8:44 am

Tamarind wrote:
Sat Nov 16, 2019 8:21 am
tiburblium wrote:
Sat Nov 16, 2019 8:04 am
It looks like the contribution limits for Roth/Trad IRA are not linked to SEP-IRA, so I could contribute to both. What about a SOLO 401k instead? My understanding is that solo 401k and employer 401k contributions are considered in aggregate, so because I max my employer 401k plan I don't believe I would be able to benefit from a solo 401k, is that right?
The limits on the employEE side of 401ks are linked. If you are maxing out your current employer plan you can't contribute more. However the employER side could still take the contributions that are currently going to your SEP-IRA. A few notes:

For a sole proprietor (or LLC) the profit sharing contribution limit is NOT 25%. It's about 20% (via some slightly complicated math as Spirit Rider shows).

The profit sharing contribution limit is shared across SEP IRAs and solo 401ks for companies controlled by the same person. So you can split your 20% across these but you don't get extra and there's no benefit to maintaining both.

So why might you want a solo 401k rather than just keeping your SEP IRA? Two reasons: 1) If you ever lost access to an employer 401k the solo would let you keep doing the $19k employee side. 2) If your income is high enough that you cannot directly contribute to a Roth IRA, which it is.

The SEP IRA will make you pay extra taxes on the conversion of non deductible IRA contributions to Roth IRA. If you haven't been through a full year with SEP IRA, this night have come as an unpleasant surprise. You can fix this by opening a solo 401k that will let you roll your SEP-IRA into it (careful, not all providers will do this) and getting the balance in all traditional/SEP IRAs to $0 before Dec 31.
That was very helpful, thank you!

I will need to read more about the profit sharing calculation, I have not started contributing to either a SEP or solo 401k yet, planning to wait until 2020. I will go with the Solo 401k to avoid the proratta rule for non-deducatable trad->roth ira conversions and fund it using the approximate 20% profit sharing. I will work with my tax accountant help me with the exact 2020 calculation for this for the first year and sanity check my calculation

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Sat Nov 16, 2019 10:28 am

I'm sure people will find this post a little strange coming from me as I provide a very strong caution on going it alone with these plans.

OP, there is an option for you to contribute your entire self-employed earned income (business profit - 1/2 SE tax). This is to use a custom one-participant 401k plan that allows employee after-tax contributions and in-service rollovers and/or in plan Roth rollovers (IRR). This allows you to use the so-called Mega Backdoor Roth.

With such a low self-employed earned income, you will not want to make any employer contributions. That will both reduce total 401k plan contributions and qualified business income (QBI) for the QBI deduction. It will reduce total 401k contributions, because employer contributions are not compensation. The employer contribution both reduces your compensation and reduces the annual addition space available.

Assuming you have $20K in self-employed earned income. If you make $4K in employer contributions. Your maximum employee after-tax contributions would be $20K - $4k employer contribution = $16K compensation - $4K employer contribution = $12K maximum employee after-tax contribution + $4K employer contribution = $16K annual additions. If you only make employee after-tax contributions, they will be $20K.

However, I remain firm in my opinion that someone who does not fully understand the ins and outs of 401k compliance should have a true third party administrator (TPA) for a custom one-participant 401k plan supporting the Mega Backdoor Roth. For at least the first year or two. It now appears that Employee Fiduciary is offering such plans for very competitive rates.

There is no reason to wait for 2020. As long as you adopt such a plan by 12/31/2019 and make the effective date 1/1/2019. You have until your tax filing date (4/15) including extensions (10/15) to make contributions.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by snowman » Sat Nov 16, 2019 11:01 am

OP,

I was in your shoes about 20 years ago (except that my W-2 job paid a lot less than yours does). The side income was low like yours, but it got me started, and eventually grew into successful full-time business (closed couple years ago). Here is my experience and lessons learned.

The client's condition was that the work contract will be signed with business entity only. In addition, it also required I purchase business insurance. I consulted with small business lawyer about the best way to go about it. She recommended S-Corp, mainly for liability protection, cost of insurance, and some other smaller items. So that's what I did. Needless to say, those start up fees and costs pretty much wiped out any profit for the year.

But it got me started, and that income grew every year. S-Corp proved beneficial, as I could later decide how much to pay myself in salary (yes, double FICA taxes), and how much to take in distribution. That, in turn, allowed me to contribute 20% of profits into SEP IRA. Later, I established i401k plan at Fidelity, which allowed me to contribute 25% of profits. Looking back, I wish I knew about i401k plans, and went with it right away, instead of SEP IRA.

So my recommendation would be to establish i401k plan before the end of the year. I went with Fidelity, but these days there are many other providers. I would also consult about potential liability, that would be my biggest worry if I were in your shoes. As others have said, LLC will do you no good, you might as well be 1099 contractor. But again, not sure how liability works in that regard, I would defer to experts on that, or consult a lawyer.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Sat Nov 16, 2019 1:23 pm

snowman wrote:
Sat Nov 16, 2019 11:01 am
But it got me started, and that income grew every year. S-Corp proved beneficial, as I could later decide how much to pay myself in salary (yes, double FICA taxes), and how much to take in distribution. That, in turn, allowed me to contribute 20% of profits into SEP IRA. Later, I established i401k plan at Fidelity, which allowed me to contribute 25% of profits. Looking back, I wish I knew about i401k plans, and went with it right away, instead of SEP IRA.
A SEP IRA and one-participant 401k have the exact same maximum employer contribution. It is 25% of compensation.

That is 25% of a W-2 employee's W-2 Box 1 wages including that of a S-Corp's 2% shareholder-employee. A self-employed individual's is also 25% of compensation, but is calculated as 20% of self-employed earned income (business profit - 1/2 SE tax), because the employer contribution is not compensation.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by snowman » Sat Nov 16, 2019 3:04 pm

Spirit Rider wrote:
Sat Nov 16, 2019 1:23 pm
snowman wrote:
Sat Nov 16, 2019 11:01 am
But it got me started, and that income grew every year. S-Corp proved beneficial, as I could later decide how much to pay myself in salary (yes, double FICA taxes), and how much to take in distribution. That, in turn, allowed me to contribute 20% of profits into SEP IRA. Later, I established i401k plan at Fidelity, which allowed me to contribute 25% of profits. Looking back, I wish I knew about i401k plans, and went with it right away, instead of SEP IRA.
A SEP IRA and one-participant 401k have the exact same maximum employer contribution. It is 25% of compensation.

That is 25% of a W-2 employee's W-2 Box 1 wages including that of a S-Corp's 2% shareholder-employee. A self-employed individual's is also 25% of compensation, but is calculated as 20% of self-employed earned income (business profit - 1/2 SE tax), because the employer contribution is not compensation.
You are correct, as always. I checked, and yes I did contribute 25%. My apology for incorrect info.

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tiburblium
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by tiburblium » Sun Nov 17, 2019 7:52 am

I'm still going back and forth trying to decide if the potential liability risk is even going to be worth it for me. I know that anyone can be sued at any time, for any reason, perhaps I am over thinking this aspect.

More detail on the nature of the work: This is a standards body for a specific industry niche that has a collective interest in common interfaces/methods of exchanging information. At my prior job, I was a participant in this group, now that I am at a new job the company who steers this working group has offered to hire me to continue to help them out. The nature of the work would be translating business requirements defined by the working group into API/interface contracts which would then be reviewed and refined by the working group. I would be a 1099 contractor for the company steering this working group, that company is paid by the group of businesses who have a common vested interest in this succeeding. I guess I am just worried that by getting involved as an independent contractor, despite only playing a supporting role, I am open myself up as a target for lawsuits if the backing companies are become unhappy with the progress/results/etc.

I did some reading on professional liability insurance (Errors and omissions insurance), this seems like something I should consider if I decide to move forward. I know the LLC would not afford me any protection, are there any other things I should consider here?

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by RickBoglehead » Sun Nov 17, 2019 7:59 am

tiburblium wrote:
Fri Nov 15, 2019 7:16 pm

He offered to pay me as a 1099 contractor...
That's nice, but your old contact apparently does not know that he doesn't get to decide if you're an employee or a contractor. Government decides...
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by simas » Sun Nov 17, 2019 8:50 am

tiburblium wrote:
Sun Nov 17, 2019 7:52 am
I'm still going back and forth trying to decide if the potential liability risk is even going to be worth it for me. I know that anyone can be sued at any time, for any reason, perhaps I am over thinking this aspect.

More detail on the nature of the work: This is a standards body for a specific industry niche that has a collective interest in common interfaces/methods of exchanging information. At my prior job, I was a participant in this group, now that I am at a new job the company who steers this working group has offered to hire me to continue to help them out. The nature of the work would be translating business requirements defined by the working group into API/interface contracts which would then be reviewed and refined by the working group. I would be a 1099 contractor for the company steering this working group, that company is paid by the group of businesses who have a common vested interest in this succeeding. I guess I am just worried that by getting involved as an independent contractor, despite only playing a supporting role, I am open myself up as a target for lawsuits if the backing companies are become unhappy with the progress/results/etc.

I did some reading on professional liability insurance (Errors and omissions insurance), this seems like something I should consider if I decide to move forward. I know the LLC would not afford me any protection, are there any other things I should consider here?
How much actual work is it (or asked another way, what is your effective hourly rate?) ? i.e. if this is 1-2 hours a week, this is pretty decent moonlighting. If this is more than few hours a week, I am not sure I would have taken it..

Also, rate and rank what your concerns and goals actually are in this
- liability in general ? it is fairly low, and same whether you do LLC or not - it does not make a difference
- taxing ? same , it does not make a difference as others covered
- using this to fill up retirement accounts? then do what SpiritRider mentioned (and what I actually do), go to document providers/'custom plans' (i.e. I use discountsolo401k.com) and for ~500 setup fee and 100 annually you have a plan that allows you after tax non roth contributions with in service withdrawals (aka mega backdoor Roth).
- how long is this side hustle likely to proceed (i.e. if this is only few months, none of this makes sense, take the money, pay your SE tax and move on).

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Sun Nov 17, 2019 9:24 am

RickBoglehead wrote:
Sun Nov 17, 2019 7:59 am
tiburblium wrote:
Fri Nov 15, 2019 7:16 pm
He offered to pay me as a 1099 contractor...
That's nice, but your old contact apparently does not know that he doesn't get to decide if you're an employee or a contractor. Government decides...
While this often stated and true in a literal sense. It is not the end of the story in and of itself. The facts, circumstances, terms and conditions of the engagement are what matter.

Most professional engagements lend themselves to being classified as client/independent contractor engagement. It is relatively easy in many circumstances to use the contract to establish the Behavioral Control, Financial Control and Relationship of the Parties, necessary to classify an engagement as a client/independent contractor engagement.

While it is improper to classify an employee as an independent contractor. It is never a problem with someone who could meet the requirements of being an independent contractor. To classify them as an employee.

Bottom line, contrary to to often stated; "a company cannot just decide the classification status of an independent contractor/employee. In many cases they can do just that based on the desire of the individual.

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tiburblium
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by tiburblium » Sun Nov 17, 2019 6:03 pm

simas wrote:
Sun Nov 17, 2019 8:50 am
tiburblium wrote:
Sun Nov 17, 2019 7:52 am
I'm still going back and forth trying to decide if the potential liability risk is even going to be worth it for me. I know that anyone can be sued at any time, for any reason, perhaps I am over thinking this aspect.

More detail on the nature of the work: This is a standards body for a specific industry niche that has a collective interest in common interfaces/methods of exchanging information. At my prior job, I was a participant in this group, now that I am at a new job the company who steers this working group has offered to hire me to continue to help them out. The nature of the work would be translating business requirements defined by the working group into API/interface contracts which would then be reviewed and refined by the working group. I would be a 1099 contractor for the company steering this working group, that company is paid by the group of businesses who have a common vested interest in this succeeding. I guess I am just worried that by getting involved as an independent contractor, despite only playing a supporting role, I am open myself up as a target for lawsuits if the backing companies are become unhappy with the progress/results/etc.

I did some reading on professional liability insurance (Errors and omissions insurance), this seems like something I should consider if I decide to move forward. I know the LLC would not afford me any protection, are there any other things I should consider here?
How much actual work is it (or asked another way, what is your effective hourly rate?) ? i.e. if this is 1-2 hours a week, this is pretty decent moonlighting. If this is more than few hours a week, I am not sure I would have taken it..

Also, rate and rank what your concerns and goals actually are in this
- liability in general ? it is fairly low, and same whether you do LLC or not - it does not make a difference
- taxing ? same , it does not make a difference as others covered
- using this to fill up retirement accounts? then do what SpiritRider mentioned (and what I actually do), go to document providers/'custom plans' (i.e. I use discountsolo401k.com) and for ~500 setup fee and 100 annually you have a plan that allows you after tax non roth contributions with in service withdrawals (aka mega backdoor Roth).
- how long is this side hustle likely to proceed (i.e. if this is only few months, none of this makes sense, take the money, pay your SE tax and move on).
Thank you for the reply, good information!

I'd expect it to last at least 1 year. I haven't negotiated the hourly rate yet, he asked directly but I told him I needed to address my other concerns first. He did mention he has $2,000/month budgeted for this, and I would estimated the workload at about 10 hours a month. So at minimum, I'd expect $200/hour but that number could probably be higher, I'll have to think about how much I should reach for. I have a combination of both the technical skills required to do the work, as well as the industry knowledge necessary to translate the requirements, also I've done this before and am known/trusted by the community.

I think there is a strategic longer term advantage as well in adding this experience to my resume and potentially leading to other such engagements in the future.

simas
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by simas » Sun Nov 17, 2019 8:30 pm

tiburblium wrote:
Sun Nov 17, 2019 6:03 pm
simas wrote:
Sun Nov 17, 2019 8:50 am
tiburblium wrote:
Sun Nov 17, 2019 7:52 am
I'm still going back and forth trying to decide if the potential liability risk is even going to be worth it for me. I know that anyone can be sued at any time, for any reason, perhaps I am over thinking this aspect.

More detail on the nature of the work: This is a standards body for a specific industry niche that has a collective interest in common interfaces/methods of exchanging information. At my prior job, I was a participant in this group, now that I am at a new job the company who steers this working group has offered to hire me to continue to help them out. The nature of the work would be translating business requirements defined by the working group into API/interface contracts which would then be reviewed and refined by the working group. I would be a 1099 contractor for the company steering this working group, that company is paid by the group of businesses who have a common vested interest in this succeeding. I guess I am just worried that by getting involved as an independent contractor, despite only playing a supporting role, I am open myself up as a target for lawsuits if the backing companies are become unhappy with the progress/results/etc.

I did some reading on professional liability insurance (Errors and omissions insurance), this seems like something I should consider if I decide to move forward. I know the LLC would not afford me any protection, are there any other things I should consider here?
How much actual work is it (or asked another way, what is your effective hourly rate?) ? i.e. if this is 1-2 hours a week, this is pretty decent moonlighting. If this is more than few hours a week, I am not sure I would have taken it..

Also, rate and rank what your concerns and goals actually are in this
- liability in general ? it is fairly low, and same whether you do LLC or not - it does not make a difference
- taxing ? same , it does not make a difference as others covered
- using this to fill up retirement accounts? then do what SpiritRider mentioned (and what I actually do), go to document providers/'custom plans' (i.e. I use discountsolo401k.com) and for ~500 setup fee and 100 annually you have a plan that allows you after tax non roth contributions with in service withdrawals (aka mega backdoor Roth).
- how long is this side hustle likely to proceed (i.e. if this is only few months, none of this makes sense, take the money, pay your SE tax and move on).
Thank you for the reply, good information!

I'd expect it to last at least 1 year. I haven't negotiated the hourly rate yet, he asked directly but I told him I needed to address my other concerns first. He did mention he has $2,000/month budgeted for this, and I would estimated the workload at about 10 hours a month. So at minimum, I'd expect $200/hour but that number could probably be higher, I'll have to think about how much I should reach for. I have a combination of both the technical skills required to do the work, as well as the industry knowledge necessary to translate the requirements, also I've done this before and am known/trusted by the community.

I think there is a strategic longer term advantage as well in adding this experience to my resume and potentially leading to other such engagements in the future.
Take the offer - the per hour rate is pretty decent and it is a great opportunity to grow your network (everyone/almost everyone you are working with on that gig should be your LinkedIn contact at minimum). Yes, that is exactly how consulting business/experience starts. even if you do not want it, people remember and I had things pay off for me for things I have done years ago (the sweetheart deal I have right now is because I worked with this specific person 17 years ago and we liked/trusted each other). People remember people (both good and bad).

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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by ICMoney » Mon Nov 18, 2019 11:43 am

Spirit Rider wrote:
Sat Nov 16, 2019 10:28 am
However, I remain firm in my opinion that someone who does not fully understand the ins and outs of 401k compliance should have a true third party administrator (TPA) for a custom one-participant 401k plan supporting the Mega Backdoor Roth. For at least the first year or two. It now appears that Employee Fiduciary is offering such plans for very competitive rates.

There is no reason to wait for 2020. As long as you adopt such a plan by 12/31/2019 and make the effective date 1/1/2019. You have until your tax filing date (4/15) including extensions (10/15) to make contributions.
I am one of the posters setting up a custom solo 401k for mega backdoor Roth with Employee Fiduciary. I suggest contacting them as soon as you can if you want to get this set up by 12/31/19. They have been very responsive to me, but it will take at least a few weeks to get the paperwork filled out and processed (i.e. it isn't something you can set up in 20 minutes online like with some basic solo 401ks). I have been in contact with them for a few weeks getting answers to my questions on the plan, and it will still be another couple weeks I would guess until everything is finalized.

Best, ICM

Spirit Rider
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by Spirit Rider » Mon Nov 18, 2019 10:14 pm

ICMoney wrote:
Mon Nov 18, 2019 11:43 am
I am one of the posters setting up a custom solo 401k for mega backdoor Roth with Employee Fiduciary. I suggest contacting them as soon as you can if you want to get this set up by 12/31/19. They have been very responsive to me, but it will take at least a few weeks to get the paperwork filled out and processed (i.e. it isn't something you can set up in 20 minutes online like with some basic solo 401ks). I have been in contact with them for a few weeks getting answers to my questions on the plan, and it will still be another couple weeks I would guess until everything is finalized.
It would be very helpful to the greater Boglehead community if you could comeback and give us a review of EF after you have made contributions and filed your tax returns.

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ICMoney
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Re: Moonlighting - get paid as 1099 vs single member LLC?

Post by ICMoney » Wed Nov 20, 2019 1:59 pm

Spirit Rider wrote:
Mon Nov 18, 2019 10:14 pm
ICMoney wrote:
Mon Nov 18, 2019 11:43 am
I am one of the posters setting up a custom solo 401k for mega backdoor Roth with Employee Fiduciary. I suggest contacting them as soon as you can if you want to get this set up by 12/31/19. They have been very responsive to me, but it will take at least a few weeks to get the paperwork filled out and processed (i.e. it isn't something you can set up in 20 minutes online like with some basic solo 401ks). I have been in contact with them for a few weeks getting answers to my questions on the plan, and it will still be another couple weeks I would guess until everything is finalized.
It would be very helpful to the greater Boglehead community if you could comeback and give us a review of EF after you have made contributions and filed your tax returns.
Thanks, Spirit Rider - I will plan on starting another thread on EF MBD Roth solo 401k in 2020 after the 2019 tax year is behind us.

Best, ICM

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