I recently met with a prospective client who has started down the road of becoming an entrepreneur. While still working full time they have started working as a side consultant for a business.
They will be paid on a 1099-M and they will be reporting their income and expenses on a Schedule C attached to their 1040. I believe that this is appropriate for a new business where the owner is not sure whether it makes sense or that they have the ability to become an entrepreneur.
I have met with people who believe that they want to be entrepreneurs, but never commit fully to an actual attempt or expand upon their initial concept.
Since being an entrepreneur is not for everyone, I suggested that they hold off on the expense of incorporating or organizing unless they believe that they really do wish to push through and take the chance on succeeding or failing as an entrepreneur.
Once the decision is made to become an entrepreneur and break away from the shackles of being a wage slave, I believe that you need to push forward and organize an LLC or incorporate an S-Corp, to protect limit your liability and protect your home and family.
I like the use of Schedule C’s as a testing ground, consider it the minor leagues before becoming a professional. Get your feet wet and test the waters, make sure that it is the right thing for you and potentially your family.
If you have any questions on how you should proceed, give us a call.