Going Contract?

[Kona Bear]

I am currently a staffer at an engineering firm. My wife has been offered a fairly nice benefits package with her new job. It doesn't make sence for both of us to have benefits so I am thinking of becoming a contractor.

I have never done the contracting thing before. What do I have to do? I think I have to set up a company for myself.

I'm looking for opinions, comments and/or suggestions. Please help.

There are some pretty knowledgeable people on Eurodrivers regarding this sort of thing I'm sure.

Thanks,

M

[Canadian Turbo]

Re: Going Contract?

You need to be a bit disciplined and organized to take advantage of the benefits but basically:

-Incorporate company at a registry
-Register for business number and GST
-Invoice clients
-Keep track of expenses
-Profit

-Pay accountant to help determine level of profit and taxes

[bart]

Re: Going Contract?

def hire blair ^ he's good accountant

[cam_wmh]

Re: Going Contract?

def hire blair ^ he's good accountant

I find a need to hi-jack this thread.

Bart,
2002 VW Golf GT TDI
2012 Audi TTRS <----------- This caught my eye. Please do elaborate.

[Kor]

Re: Going Contract?

Hardest part is finding clients. If you KNOW someone who will hire you, especially with some long-term stability, you should definitely become a private contractor. Be sure your rates are high enough to cover:

- Your vacation and/or sick leave (you will basically be taking it unpaid)
- Any benefits you've not already covered through your spouse
- Time in-between clients (budget some, 2-4 weeks a year)
- "RRSP Matching" or similar if you used to get that as an employee
- Any promotional materials you need (business cards, websites, etc)
- Cost of incorporating
- Expenses (travel for example)
- Taxes

Finding a client is really hard though and a lot of companies will jerk private contractors around.

Work backwards to find your rate... you will probably only be able to work 200 days, 8 hours a day in a year.

[bonfire]

Re: Going Contract?

I was always informed that being a contractor with only one Client was seriously frowned upon by the Tax Man.

[Geobmx4life]

Re: Going Contract?

You need to be a bit disciplined and organized to take advantage of the benefits but basically:

-Incorporate company at a registry
-Register for business number and GST
-Invoice clients
-Keep track of expenses
-Profit

-Pay accountant to help determine level of profit and taxes

Making a business plan should be near the top as well. A one, three and 5year is a good way to start. And if you are going to need financing, a one year business plan is usually required as part of the terms.

[Tuna]

Re: Going Contract?

I was always informed that being a contractor with only one Client was seriously frowned upon by the Tax Man.

I've heard the same thing. I know a number of contractors and I know of some that seem to work over 90% for one client. I'm not sure if they would ever have issues if you were ever audited.

[Vulcan]

Re: Going Contract?

I had a friend that went this route and one of the things that surprised him was the requirement many clients had for him to carry "errors and omissions" insurance coverage which cost him around $8K a year. I think it would be best to spend some time talking somebody who knows all the ins and outs before you end up jumping into it and finding yourself on the short end of things.

[Canadian Turbo]

Re: Going Contract?

If you are a sole proprietor than only having one client is a major issue with CRA, however if you are running an incorporated business then it becomes one legal company billing another and then there are no issues with the number of clients.

My simplified list was based on the assumptions that the OP would just be switching from employee to contractor with his existing employer and thus avoiding additional issues such as financing, finding clients etc. As for insurance it would depend on the scenario but I have seen many engineering consultants that carry no where near that level of insurance costs as mentioned by Vulcan. Contracting is not for everyone and every scenario but depending on the dollar amounts and strategies employed to take money out of the company (dividends, management fees, payroll), use of expenses and corporate tax rates for small businesses there is often some savings to be made.

[bart]

Re: Going Contract?

I find a need to hi-jack this thread.

Bart,
2002 VW Golf GT TDI
2012 Audi TTRS <----------- This caught my eye. Please do elaborate.

hmm someone must have hacked my account or something!

[Russell]

Re: Going Contract?

I currently contract back as an Engineer to one company and like Blair said this is a non issue. I have not been contracting very long but have enjoyed both sides of being a contractor. When things are busy it’s great because you get paid for what you work, on the flip side of the coin if things slow down you could be the first thing to go. If you’re a P.Eng you do have to carry Professional Liability or General Liability (I only carry General because I’m an EIT), I also have to have my own Workers’ Compensation number (this stop you from being a sole proprietor) for site visits. If you work for a company that can keep you busy as a contractor it can work out nicely but you could end up bouncing from company to company finding new projects (which some guys really like).

Another thing to note is…. Get a pay roll number when you're incorporating… if you don’t you will get burned… I found out the hard way.

[Canadian Turbo]

Re: Going Contract?

Another thing to note is…. Get a pay roll number with you busy number… if you don’t you will get burned… I found out the hard way.

Care to explain this a bit more?

Oh Bart stop leaving your account logged in at those Polish internet cafes

[Russell]

Re: Going Contract?

Care to explain this a bit more?

Oh Bart stop leaving your account logged in at those Polish internet cafes

Because I have an incorporated business and thus pay myself (from company to person) I have to do payroll. I did my payroll at the end of the year (2010) and thought I had until my corporate tax deadline to submit all my payroll taxes. This is not true and depending on how you file, you have 30days (I think) to pay your withheld payroll taxes etc etc. When I found all this out I learned that I did not even have a payroll number for my company. This may be a prime example of why you want to hire a good accountant to look after this stuff.

[Canadian Turbo]

Re: Going Contract?

Thanks for expanding; if you do management fees you can often get away with just paying the CPP once a year (by Jan 15th) and then settle the rest up on your personal taxes. Dividends is another option to avoid paying CPP all together but does not qualify for RRSPs and requires payment of corporate taxes too. There are many options to help get money out of the corporation, and of course you can always leave some in and invest there too!