4 ms·

>nor can afford to incorporate a business You don't need to incorporate to be self-employed. The costs are essentially zero.

DominikR 11y ago
Depending on where you are living of course. I'm giving you here an example of Austria (EU): If you want to earn more than around 5000 dollars a year, you HAVE to incorporate. The cheapest setup will still cost you a few hundred dollars per year, but from start to incorporation it will take you at least 2-3 weeks. Many will need the services of a tax consultant to deal with the taxes, which also involves some costs. (If you are employed the company has to deal with the taxes for you) Then there are also liability issues depending on how you incorporated. Something similar to a LLC costs more to incorporate, but with the cheaper ones you are liable with your private property. (if you get sued by a customer they could take your house) Another issue is that you don't receive social services like unemployment benefits if it didn't work out for you. And then you also pay more for health services than normal employees. These are a lot of issues for someone just trying to make a few bucks because he/she has for some reason or another financial problems. It's not some insurmountable problem for entrepreneurs that have a reasonable plan and some money saved up, but we are talking about people that are trying to get through a tough year. In such a situation the additional risks when you are already at the bottom are for many not acceptable.
coldtea 11y ago
Maybe in your country. In my country to be self-employed you have to register and pay "freelancer" insurance cost to the state that add up to something equivalent to $800 per month (nominally $300-$400 in our economy).
tsotha 11y ago
In most US states you need a business license. People incorporate for a reason, though. If you don't your personal assets aren't protected if the business gets sued or becomes insolvent. There's a reason Donald Trump still has lots of money after having his businesses go bankrupt four times.
- adebtlawyer 11y ago
  A corporation isn't a magic shield. The limited liability exists mostly to allow investors to own stock in large enterprises without being exposed to more liability than the value of their shares. Trump is/was doing multimillion dollar real estate development with outside investor's money, and observing lots of corporate formalities. That's why his businesses could go bankrupt without wiping him out. If I represent a creditor, I'm not going to care if your chickenshit small business is incorporated or not, particularly if it's just a professional services business like a consultant. I'll just sue you AND your corporation. Besides, most creditors that loan to small businesses demand personal guarantees from the owners. Just having a corporation won't make you Donald Trump. But it might earn your tax preparer some fees.
  - tsotha 11y ago
    >If I represent a creditor, I'm not going to care if your chickenshit small business is incorporated or not, particularly if it's just a professional services business like a consultant. I'll just sue you AND your corporation. You can sue anybody you want. The question is always whether or not you can prevail. If you're just a creditor you would almost certainly be unable to get a judgement against the individual unless he did something stupid like spend corporate money on personal items.
    - adebtlawyer 11y ago
      Doing stupid things is common in the small business world. For example, I regularly run across people who have no personal bank account and just use the company account for everything. In practice, there is almost always something about how things are run (particularly with a failing company) that is actionably questionable and pulls the owner personally into the suit.

DominikR 11y ago

Depending on where you are living of course. I'm giving you here an example of Austria (EU): If you want to earn more than around 5000 dollars a year, you HAVE to incorporate. The cheapest setup will still cost you a few hundred dollars per year, but from start to incorporation it will take you at least 2-3 weeks. Many will need the services of a tax consultant to deal with the taxes, which also involves some costs. (If you are employed the company has to deal with the taxes for you) Then there are also liability issues depending on how you incorporated. Something similar to a LLC costs more to incorporate, but with the cheaper ones you are liable with your private property. (if you get sued by a customer they could take your house) Another issue is that you don't receive social services like unemployment benefits if it didn't work out for you. And then you also pay more for health services than normal employees. These are a lot of issues for someone just trying to make a few bucks because he/she has for some reason or another financial problems. It's not some insurmountable problem for entrepreneurs that have a reasonable plan and some money saved up, but we are talking about people that are trying to get through a tough year. In such a situation the additional risks when you are already at the bottom are for many not acceptable.

coldtea 11y ago

Maybe in your country. In my country to be self-employed you have to register and pay "freelancer" insurance cost to the state that add up to something equivalent to $800 per month (nominally $300-$400 in our economy).

tsotha 11y ago

In most US states you need a business license. People incorporate for a reason, though. If you don't your personal assets aren't protected if the business gets sued or becomes insolvent. There's a reason Donald Trump still has lots of money after having his businesses go bankrupt four times.

adebtlawyer 11y ago
A corporation isn't a magic shield. The limited liability exists mostly to allow investors to own stock in large enterprises without being exposed to more liability than the value of their shares. Trump is/was doing multimillion dollar real estate development with outside investor's money, and observing lots of corporate formalities. That's why his businesses could go bankrupt without wiping him out. If I represent a creditor, I'm not going to care if your chickenshit small business is incorporated or not, particularly if it's just a professional services business like a consultant. I'll just sue you AND your corporation. Besides, most creditors that loan to small businesses demand personal guarantees from the owners. Just having a corporation won't make you Donald Trump. But it might earn your tax preparer some fees.
- tsotha 11y ago
  >If I represent a creditor, I'm not going to care if your chickenshit small business is incorporated or not, particularly if it's just a professional services business like a consultant. I'll just sue you AND your corporation. You can sue anybody you want. The question is always whether or not you can prevail. If you're just a creditor you would almost certainly be unable to get a judgement against the individual unless he did something stupid like spend corporate money on personal items.
  - adebtlawyer 11y ago
    Doing stupid things is common in the small business world. For example, I regularly run across people who have no personal bank account and just use the company account for everything. In practice, there is almost always something about how things are run (particularly with a failing company) that is actionably questionable and pulls the owner personally into the suit.