What Corp To Corp Means For An Independent Contractor

What does Corp-to-Corp mean?

The term “corp to corp” gets thrown around a lot these days. Let’s take a look at what it actually means.

If someone offers you a “Corp to Corp” opportunity, it simply means that instead of paying you, an individual, you will need to have an LLC or corporation that they can pay for your services. This way, their “corp” will be paying your “corp” instead of paying you personally.

Bottom line, corp to corp means that you have to own either an LLC, corporation, or S corporation.

So, why exactly do employers prefer corp to corp arrangements? It’s primarily for 3 reasons:
1. Reduce employment taxes
2. Reduce employment risks (it’s harder to sue in a C2C relationship)
3. It reduces the likelihood that the employer will be audited for misclassifying employees.

What’s in it for you? A lot actually. Here are the primary benefits to you, the independent contractor who structures the offer doing corp to corp:
1. Higher pay. Most C2C arrangements generate pay increase of 10%+ over W2.
2. Tax benefits. You can leverage your entity for tax savings that you couldn’t have as a W2 employee or a sole proprietor.
3. Flexibility. You own your own business. You can hire other employees to do the work, you can try and stack contracts, maybe work from home more frequently, etc.
4. Limited liability protection. Having an entity can protect you in the event of a lawsuit, debts, etc.

It’s critical for you to determine if an LLC, corporation, S corporation, or LLC/S corporation hybrid is the best entity for you and your business. If you have questions about how to structure your business, or which entity is best for you and your situation, contact us today for your free tax consultation.

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Tags: 1099, business structure, corp to corp, independent contractor, IT consultants