There are many qualified people in America looking for work currently. Many of these people have degrees from universities and previous work experience. They certainly have the knowledge and capabilities to help a business grow, but companies are still reluctant to hire full time employees due to the uncertainty of the future. However many American companies are looking for part time, project based employees to fill existing needs. This article will cover what a person needs in order to start consulting.
First off, since the consultant is for all intents and purposes a business, the consultant needs to treat themselves like one. Brand image is important, you need to be perceived as educated, professional, reliable, and trustworthy. Realistically, all companies are going to want to see a degree in the relevant field. A bachelor’s degree normally suffices but a master’s would be better just because you would have less competition for your skill set. Also any previous work experience in the field will obviously help. If you’re applying for a design-based project you will most likely need a portfolio highlighting your best work.
Now the consultant isn’t ready to work just yet. Unfortunately because consulting is inherently different from traditional employees there are more requirements that need to be met before a company will consider hiring a consultant for a project. The main difference between the independent consultant and the traditional employee is that the 1099 (independent consultant) is required to pay employer side of taxes himself. However the company is still held liable if the “consultant” fails the 20 question test and is an employee in actuality. The company will then be faced with fines from the IRS and will owe all the taxes that needed to be paid. Due to this risk of hiring independent consultants many companies will not hire them unless they are the W-2 employee of an agency and are covered with their own professional insurances.
The main benefit of consulting through an agency is that you won’t have to worry about running the “back office” of your consulting. Most staffing agencies besides placing you in a job will also take care of your payroll and invoicing, cover you with professional insurances, pay employer side of taxes, and take care of any responsibilities a company has for it’s employees. However the downside to these agencies is their high service fees. Many will charge 25% or more of your pay rate leaving you with significantly less than what you started with. However this is one of the reasons why independent consultants have a much higher pay rate than regular employees do at a company. Fortunately there are other options for the independent consultant.
The independent consultant has the opportunity to brave the consulting landscape himself. This can be extremely rewarding for many people and it’s the main reason why many people have chosen to leave their desk jobs to pursue a career in consulting. They enjoy picking their projects, being their own boss, and making all of the business decisions. However their are downsides to this option.First and foremost is the time constraints that arise due to the inherent business model of the independent consultant. The consultant needs to file quarterly estimated taxes, cover the “employer” side of taxes, perform his own payroll and invoicing, find his own jobs, and then find time to work on his existing projects. Furthermore the consultant has to pay for his own business supplies out of his own pocket. Normally those supplies such as computers, software, mileage, and other business expenses may have been covered by his employer. This is why many independent consultants choose to register and file as an LLC (limited liability corporation). This allows them to write off their business expenses against their taxes.
There is another option which many people don’t know about. iamindependent.com is a company which acts as employer of record giving you all the benefits of W-2 employment which this article has already covered. The company does not place consultant’s in jobs like a staffing agency but it will cover all back office responsibilities at a much lower fee. This business model provides the consultant the freedom to work on whatever projects he wants without the back office liabilities eating up all his time. They also provide all of the professional insurances which can open many doors to consulting projects due to many companies requiring these insurances just to work for them. Also, they provide group rate health insurance plans enabling the consultants to purchase affordable healthcare for themselves and their family.
Following is a quick summary of what someone who is new to independent consulting needs:
Degree in relevant field and work experience (Suggested) Professional Insurances – Required by many companies Employer of Record – Staffing agencies or umbrella companies such as iamindependent.com to handle all back office responsibilities Legal and Accounting Advisors – 1099’s have many legal and accounting issues. It’s always a good idea consult your lawyer or consultant before making any decisions regarding your consulting.
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