In a Corp-to-Corp situation, AVID Technical Resources would pay your company directly without taking out any taxes or additional withholdings. This means that you must register with the state in which you incorporate and provide AVID with a Federal ID number. Additional liability insurance is highly recommended.
The biggest drawback of setting up your own corporation is the time, effort and potentially additional money spent to set up and maintain the records of your corporation and all the required tax filings. Additional pros and cons include:
- No self-employment tax.
- By utilizing small business retirement plans, you can defer tax on a larger percentage of income.
- Losses might be used to offset taxable income.
- Double taxation of earnings is avoided as compared to regular corporations.
- Significant bookkeeping and tax reporting required.
- More difficult to organize and dissolve.
- Some states have a minimum tax you will have pay regardless of profitability.
- You must receive at least some salary from the corporation, which means the corporation is subject to payroll taxes and filing.
- Annual Report fees are due with every state you do business in.
- S-Corp shareholders pay tax on undistributed profits.
If you don’t make the S-Corp election you can be stuck with the 35% Personal Services Corporation (PSC) flat tax.
If you have any additional questions please feel free to contact any one of our IT recruiters at AVID Technical Resources.