As a self-employed, independent contractor it is important to be able to offset your considerable earnings with the expense associated with execution of your contracts. In 2018, the tax laws were changed in such a way that can make it difficult to claim your business expenses as deductions when filing your Federal tax return.

Discuss your tax obligations with your Certified Public Accountant (CPA).

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It is generally good advice to secure a license to be recognized as a business entity by your home state. This can be achieved by filing Limited Liability Corp (LLC) documents or by classifying your business as a non-stock corporate entity.

• LLCs are governed by the individual states and are recognized in all states. They are organized by filing with the appropriate state government office, though state laws regarding LLCs vary. In all states, an LLC is a combination of a partnership and a corporation, though it’s technically neither. An LLC allows the pass-through taxation of a partnership with the limited liability of a corporation.
• A Non-Stock Corporation is basically a corporation that does not issue shares of stock. It can be formed as either a for-profit or non-profit corporation. Since the Non-Stock Corporation has no shareholders, it is owned by its members – meaning a member-owned corporation that does not issue shares of stock. The qualifications for membership and members are defined in the corporation by-laws. There can be different classes of members such as voting and non-voting members. Please note that only the IRS can determine whether your corporation qualifies for tax-exempt status, and grant such status. The act of forming a Non-Stock Corporation does not constitute having non-profit tax exempt status approved.

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Some great resources for filing your incorporation paperwork are your local Small Business Administration (SBA) office, LegalZoom and others. These entities can also assist in the formation of your business structure – such as writing a business plan, interviewing and hiring staff, securing funding and filing necessary regulatory documents with the state.