Employee vs. Independent Contractor Decisions

When I made the decision to work part time from home for my current employer, I was torn between being an independent contractor and simply becoming a part-time employee. Even though it’s likely I won’t work enough hours to qualify for benefits, there are other important considerations:

• By being an independent contractor, I can command a higher hourly rate. This is due to the fact that I will have to pay my own payroll taxes, which eat up about $.37 of each dollar I earn.
• By being an employee, I preserve my ability to obtain credit. This is due to the fact that once an individual is fully self-employed, creditors will want to see two full years of self-employment before they are willing to lend to you. This is especially true when you want to buy a home.
• By being an independent contractor, I can start asap on building up to those two years of self-employment history – and every second counts sometimes.
• By being an employee, I lengthen the time I can participate in COBRA if I so desire.
• By being an independent contractor, I will have to hire a bookeeper sooner than later, eating up precious early capital I would rather spend on copywriters or PPC advertising.

There was a time when I went with the independent contractor status when I launched Aminion Design, and my first client was my former employer. I wanted to establish the company asap. This time around, since there is some uncertainty about my financial future, I want to preserve my ability to get credit – so I chose to be a work at home part time employee. Thankfully, because I have been through this stuff, I could easily make the decision based on the other factors in my life.

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