Hello fellow mustachians,
I've been a long time lurker and am considering making a fairly big decision and I figured you would be just the right people to ask for some guidance. I currently work for a large engineering firm that has increased the number of contractors it has been hiring. I used to work for a contracting company and I've seen the rates. The aforementioned firm pays up to 3x my current salary for similarly qualified contract workers. So, I've been thinking about transitioning to being an independent contractor.
After some quick research it appears that the best way to go about this is by forming a sole proprietorship. I've done a little bit of research and it appears reasonably cheap and easy to create one. I'd then use the additional wages to cover benefits that the firm currently pays for. The below table shows the percent pay increase I'd need to break even. After some quick back-of-the-napkin calculations that looks like this:
Holidays/PTO: +10% (11 holidays + 15 days PTO)
End of year Bonus: +10%
401k match: +5%
General Liability Insurance: +25% (Internet indicates that this can range from $500 to $15,000, I chose the $15,000 to be conservative).
Total: +50%
A 50% raise doesn't even come close to the 200% raise I'd (maybe) get from shifting to an independent contractor. I realize being independent might give me less leverage, but even if I only got a 100% raise I'd come out 50% ahead! (Note: I'm 24, so I don't have to worry about health insurance for another 2 years. It appears, however, that I've got plenty of wiggle room to add that in down the line). I also understand that you'd need to add in some opportunity cost for the amount of time spent taking care of things like finding liability insurance, the extra tax implications, etc. I'm being way too optimistic right? Surely there's something I haven't thought of.
Anyways, the extra independence and money from being an independent contractor sounds great. Additionally, I've mentioned the idea to my boss and he seemed fairly receptive to the idea or at the very least not opposed.
Would love any thoughts and advice from those of you who have done something similar and can provide a well-measured face-punch to my unrelenting optimism above.
Thanks!