FAQ for alt.computer.consultants.moderated

Created: 15 July 2000 by splbndr@mindspring.com (Ric Goldman)
Updated: 18 November 2001 by splbndr@mindspring.com (Ric Goldman)
Last updated: 10 December 2001 by splbndr@mindspring.com (Ric Goldman)
Last updated: 26 May 2003 by splbndr@mindspring.com (Ric Goldman)

 

Table of Contents

These are the topics for the FAQ.  If you have suggestion for addition information about a particular topic, or a new topic or question, see section 0.1.3.3.  In addition to the topics themselves, there are some additional special indicators in the Table of Contents.

[Editor's Note - Section 12 is major need of updating and fleshing out.   Please help here where you can]

0 About alt.computer.consultants.moderated
0.1 What resource documents are available?
0.1.1 The Charter
0.1.2 The Mini-FAQ
0.1.3 The FAQ
0.1.3.1 What is the purpose of the FAQ?
0.1.3.2 How is the FAQ distributed?
0.1.3.3 How are changes made to the FAQ?
0.1.3.4 Who are the contributors?
0.1.3.4.1 Precursors to this version
0.1.3.4.2 <+> The current FAQ file
0.1.3.5 Disclaimer
0.2 What is the purpose of this newsgroup?
0.2.1 Do I have to be a consultant to participate?
0.3 What are appropriate topics for posting to this newsgroup?
0.4 What the group is NOT for?
0.4.1 What topics or types of posts are prohibited?
0.4.2 What about technical questions?
0.5 How can I get good response to my postings in this newsgroup?
0.6 Moderation
0.6.1 What does the "moderated" part of the name mean?
0.6.2 My post hasn't shown up in the group.  What should I do?
0.6.3 How can I contact the moderator?
0.7 Can I find a job through this newsgroup?
0.8 Where can I get more information on related topics?
1 About Computer Consulting
1.1 What is a consultant?
1.2 What is a contractor?
1.3 <+> What are the differences between a consultant and contractor?
1.4 <+> What kind of work do computer consultants do?
1.5 <+> What should I have to get started as a computer consultant?
1.5.1 [US] What do I need to look like a business?
1.5.2 <?> What equipment do I need?
1.5.3 <?> What other supplies do I need?
1.5.4 <?> How do I get my first contract?
1.6 <+> What other consulting activities should I consider?
2 Organizing your Business
2.1 [US][UK] What is a Sole Proprietor (Sole Trader)?
2.2 [US][UK] What is a Partnership?
2.3 [US][UK] What is a Limited Liability Company?
2.4 [US] What is a Corporation?
2.4.1 [US] What are the (dis)advantages of a corporation?
2.4.2 [US] What can I name the Corporation?
2.4.3 [US] What is a registered agent?
2.4.4 [US] What is an S corporation?
2.4.5 [US] What's the difference between a "C" and an "S" Corporation?
2.4.6 [US] Should I incorporate?
2.5 [UK] What is a Cooperative?
2.6 [US] What about being an employee of another organization?
2.7 [US] Why do some clients only work with incorporated consultants?
2.8 <+> [US] What are the advantages/disadvantages of working W2, 1099, Corp-to-Corp?
3 Running your Business
3.1 What are the considerations of having multiple contracts?
3.2 What is moonlighting?
3.3 What are the considerations of having part-time contracts?
3.4 What are Direct vs. 3rd-party contracts?
4 Accountants and Attorneys
4.1 Do I need an accountant?
4.2 What can an accountant do for me?
4.3 <+> How much can I expect to spend on accountant fees?
4.4 <+> How do I find an accountant?
4.5 <+> Do I need an attorney?
4.6 <+> What can an attorney do for me?
4.7 <+> How much can I expect to spend on legal fees?
4.8 <+> How do I find an attorney?
5 Legal issues
5.1 What legal liabilities might I incur as a consultant?
5.2 [US] Who owns the code I write for a client (copyright)?
5.3 Should I work under a contract?
5.3.1 <?> What contract clauses should I consider?
5.3.2 What contract clauses should I look out for?

6 Tax issues
6.1 [US] What is 1099 vs W2 status?
6.1.1 [US] What is independent contractor status and how can I protect it?
6.1.2 [US] What are the "IRS 20 questions" for?
6.1.3 [US] What are the IRS 20 questions?
6.1.4 [US] What about recordkeeping?
6.1.4.1 [US] What items/expenses should I keep track of?
6.1.4.2 [US] What about home-office issues?
6.1.5 [US] What is the "self-employment" tax?
6.2 [UK] What kinds of consultants are there from a tax standpoint?
6.2.1 [UK] What are the considerations for Self-employed?
6.2.2 [UK] What are the considerations for Employed?
6.2.3 [UK] Should I have Company directors?
6.2.4 [UK] What is VAT?
6.2.4.1 [UK] Should my business be VAT registered?
6.2.4.2 [UK] Should I register for VAT by "cash accounting"?
6.2.5 [UK] Should I trade myself as a registered company?
6.2.6 [UK] Should I pay self-employment or full class N1 stamp?
7 Financial issues
7.1 How can I collect unpaid invoices from clients?
7.2 [US] What items involve sales-tax?
7.3 Who is responsible for my retirement?
7.3.1 <?> [US] What profit sharing options do I have?
7.3.2 <?> [US] What retirement plan options do I have (Keogh, IRA, 401K, pension plans)?
7.3.3 <?> [US] What tax sheltering issues should I be concerned about?
7.4 [US] What about working with banks?
8 Government issues
8.1 [US] What is the "530 Safe Harbor"?
8.2 [US] What is "Section 1706"?
8.3 [US] What is UCITA?
8.4 [US] What is H1-B?
8.5 <?> [US] What about registration and certification?
8.6 <?> [US] Are computer contractors licensed by the state?
9 Insurance issues
9.1 <?> Should I have liability insurance (public and client)?
9.1.1 [US] What is Worker's Comp and do I need it?
9.1.2 What is Errors and Omissions insurance?
9.1.3 Do I need office insurance (fire, theft, &c)?
9.2 What about Health insurance?
9.3 What about Long Term Disability insurance?
9.4 Do I need "Key Man" insurance?
10 Telecommuting
10.1 <?> What are likely client issues?
10.2 <?> What should I consider in setting up a home-office?
10.3 <?> What should I consider as far as Internet and/or DSL access?
11 Marketing
11.1 What should I charge (consulting fee guidelines)?
11.2 <?> What is a broker (or bodyshop) and should I use one?
11.3 What is a fair commission to pay an agent or broker?
11.4 <+> What are good ways for contacting new clients?
11.5 What are effective uses of Direct Mail?
12 Resources
12.1 [US] What useful organizations exist for computer consultants?
12.1.1 What is the ICCA?
12.1.2 What is the Programmer's Guild?
12.1.3 What is the IEEE Computer Society?
12.1.4 What is the ACM?
12.1.5 <+> What are SIGs?
12.2 <?> What about vendor programs/products for consultants?
12.3 [UK] What general business organizations are helpful for consultants?
12.4 What's on the net that I should look at?
12.5 <+> Read any good books lately?
12.6 Read any good magazines lately? (controlled circulation)

Back to ACCM index


0 About alt.computer.consultants.moderated

As stated our Charter, the newsgroup alt.computer.consultants was created as a place for computer consultants to discuss their business.  However, for several years there have been an inordinate number of off-topic posts, mostly from people who want help with technical questions, recruiters trolling for resumes and general commercial advertisements (spam).  As a result, alt.computer.consultants.moderated was created in 1996.  However, by 1998 the group foundered and had become quiescent.   However, the "noise-to-signal" ratio on alt.computer.consultants had gotten so bad by 2000 that many members were again hungering for a place where content was king.  Led by the efforts of Charles Calvert and others, the group was taken out of mothballs, established itself with a Charter, moderator, and Mini-FAQ.  It continues as a vibrant newsgroup today.

0.1 What reference documents are available?

0.1.1 The Charter

The Charter was created as collaborative effort of the founding participants in the revamped newsgroup.  The master copy is available as text at http://www.celticwolf.net/accm/charter.txt.

0.1.2 The Mini-FAQ

The Mini-FAQ was put together as a short initial adjunct to the Charter, which could be periodically posted to the newsgroup with information to help new (and old) readers of the group getting started or needing a refresher on how the group operators.  It includes pointers to the Charter and the moderator's email address.

0.1.3 The FAQ

0.1.3.1 What is the purpose of the FAQ?

This is the Frequently Asked Questions list for the Usenet newsgroup "alt.computer.consultants.moderated".  Since it is an "alt." group, there is technically no formal charter (although the newsgroup participants did in fact create one), and this FAQ is only a guide to the current interests of the readers.  It is subject to change over time and as readership changes.  It contains summary information about the newsgroup's Charter and Mini-FAQ as well as general information on issues like business trading status, tax, insurance, useful contacts, information resources, &c.

0.1.3.2 How is the FAQ distributed?

Because of its size, the FAQ is typically not posted to the newsgroup.  Instead, a periodic reminder will be posted with pointers to the FAQ and other newsgroup reference documents.

The master version of the FAQ is in HTML and available at http://timelord01.home.spyrnet.com/accm/faq.htm.

Periodically, a text version of the FAQ will be updated as well.  Please note that the currently-available text and HTML versions may differ slightly.

0.1.3.3 How are changes made to the FAQ?

If you have any gems of advice to share on the above or the following topics, or anything else that may be of use to consultants, contractors and freelances, please email them to splbndr@mindspring.com for incorporation into the FAQ. I am thinking not so much of the advice itself (which could go on for megabytes) as of pointers to advice - organizations, books, net URLs, sources of help, advice, training, business funding, legal matters, networking, contact details of relevant organizations.  In addition, a discussion from the newsgroup itself may be summarized and included into the FAQ.  Finally, if a subject is consider worth getting information for inclusion in the FAQ, there may be a post to the newsgroup requesting people submit whatever information they have on the subject.

0.1.3.4 Who are the contributors?

Unlike many FAQs, this one did not solely evolve from scratch.  It started as an amalgam of information contained in the FAQ for the newsgroups alt.computer.consultants and uk.consultants, which maintained pretty current information up through 1999.  However, anything added since its initial creation has been a result of the newsgroup's own participants.

0.1.3.4.1 Precursors to this version

For alt.computer.consultants, the original FAQ committee included:

The FAQ file itself was maintained by Marcus Williamson (marcus@myrealbox.com).   In addition, an unofficial mini-FAQ was put together by Dana Persells (dana@tailored-computing.com).

For uk.consultants, the FAQ itself states that there were too many contributors to name, but that the keeper of the file was Richard Burnham (ukc@wiseword.demon.co.uk)

0.1.3.4.2 The current FAQ file

This current version of the alt.computer.consultants.moderated FAQ file was created and is maintained by Ric Goldman (splbndr@mindspring.com).   Special thanks go to Charles Calvert and Jerry Stuckle for suggestions about the initial topics and layout.  The contents are the collective "wisdom" of the newsgroup's participants including:

0.1.3.5 Disclaimer

The following has been provided by contributors to alt.computer.consultants.moderated.   As such, it is not official accountancy, legal, or other advice.  Although we hope that it will be helpful, all info is "as is" - use at your own risk - we assume no liability for accuracy or usability.

The FAQ sections that follow were created and distributed for entertainment and general education purposes only.  None of the contributors are lawyers, accountants, or in the business of providing legal, accounting, or tax advice, and are not licensed or qualified to give legal, accounting, or tax advice in any country.  None of the FAQ editors have endorsed this information.  This FAQ should not be construed in any way as providing legal, accounting or tax advice. 

Remember that situations change and advice can become out of date. Before entering into a legal commitment, it is up to you to get appropriate advice from
an authoritative source. Legal, accounting, and tax matters should always be taken to a duly licensed and qualified professional.

0.2 What is the purpose of this newsgroup?

alt.computer.consultants.moderated is a forum for professional computer consultants (and other interested parties) to exchange ideas and information regarding the conduct of their consulting businesses.

A consultant is defined as someone who provides others with advice, guidance and assistance in his or her professional field.  A consultant may be self-employed, a principal in a small firm, or an employee of a larger firm. The scope of the group includes those describing themselves as contractors and freelancers, and others in similar positions.

The group is intended to foster discussion in all area relevant to computer consultants, including business, legal, marketing, ethical and social considerations.   Technical issues may be raised but only as they relate to doing the business of consulting.  Such relationship should be specified in the posting.  Acceptable topics include (but are not limited to): tax rulings, client management, starting out, contracts, clarification of accounting methods, ethics, networking with other computer consultants, telecommuting, running a consulting business, general industry trends or developments, the future of computer consulting, etc.

It is NOT the purpose of this newsgroup to provide consulting advice on technical matters.  See Section 0.4.2 for suggestions where to seek such advice.

0.2.1 Do I have to be a consultant to participate?

No, as long as your posts are on topic and otherwise conform to the requirements set forth in the charter, you may participate.  In fact, we encourage participation by others who are interested in consultants and their own, as well as by those who can provide information of assistance to consultants.

0.3 What are appropriate topics for posting to this newsgroup?

This section is intended as guidance, not as any definitive or limiting list of topics.   Here are typical subjects that are considered on-topic (but first check in the Table of Contents section of the FAQ (accessible from http://timelord01.home.sprynet.com/accm/) to see if a question has already been answered there):

0.4 What the group is NOT for?

0.4.1 What topics or types of posts are prohibited?

Section 3.0 of the Charter goes into details about specific items which should not be part of alt.computer.consultants.moderated, but to summarize, you should avoid:

Remember, if you post in this group you are going public in front of an audience that may include potential clients, associates and agencies.  Unprofessional behavior will frighten them off.

0.4.2 What about technical questions?

Technical questions may be posted if they specifically relate to consulting AND the poster specifies the relationship in their post.  For example, it would be appropriate for a poster to ask for a recommendation for accounting software that works best for their specific consulting market.

However, please don't post questions or answers about sick computers in this newsgroup.   This newsgroup discourages the posting of questions about solving hardware or software problems because there are more appropriate newsgroups in which to post such questions.  For example:

    Question on...                      Look in...
    ----------------------------------  --------------------------------
    PC Hardware                         comp.sys.ibm.pc.hardware.*
                                          (many sub groups!)
                                        comp.sys.ibm.ps2.hardware
                                        comp.sys.laptops
                                        ...etc.
    ----------------------------------  --------------------------------
    Servers                             comp.dcom.servers
    Modems                              comp.dcom.modems
    Printers                            comp.periphs.printers
    SCSI devices                        comp.periphs.scsi
    Other peripherals                   comp.periphs
    ----------------------------------  --------------------------------
    PC Software                         biz.comp.software
                                        comp.software.*
                                        comp.sys.ibm.pc.*
                                        ...etc.
    ----------------------------------  --------------------------------
    Macintosh Hardware                  comp.sys.mac.hardware
                                        comp.sys.mac.portables
                                        ...etc.
    ----------------------------------  --------------------------------
    Macintosh Software                  comp.sys.mac.apps
                                        comp.sys.mac.programmer
    ----------------------------------  --------------------------------
    Other Systems                       amiga.hardware / amiga.software
                                        comp.sys.amiga.applications
                                        comp.sys.atari.st
                                        comp.sys.dec
                                        comp.sys.hp.*
                                        comp.sys.newton.*
                                        ...etc.
    ----------------------------------  --------------------------------
    Databases                           comp.databases.misc
                                        comp.databases.ms-access
                                        comp.databases.xbase
                                        comp.sys.mac.databases
    ----------------------------------  --------------------------------
    Networking/networks                 comp.sys.novell
                                        comp.dcom.lans.* (where * equals:
                                        ethernet; fddi; misc; token-ring)
                                        comp.protocols.tcp-ip.ibmpc
                                        comp.os.os2.networking
    ----------------------------------  --------------------------------
    Non-commercial sale of hardware     misc.forsale.computers.pc-clone
                                        ...and local 'for sale' groups
    Commercial sale of hardware         biz.computers.hardware
    ----------------------------------  --------------------------------

A complete, updated list of newsgroups can be found in news.groups.

0.5 How can I get good response to my postings in this newsgroup?

0.6 Moderation

Moderation is one of the things that separates this newsgroup from its predecessor, alt.computer.consultants.  The intent is to have the moderation along with the participants, keep discussions focused, on topic, and with minimum distraction or "noise".

0.6.1 What does the "moderated" part of the name mean?

In a moderated group, all posts are forwarded to a moderator for approval.  If the post conforms to the requirements set forth in the newsgroup's Charter, the moderator will approve it and post it to the newsgroup.  If not, the moderator will reject the message.

0.6.2 My post hasn't shown up in the group.  What should I do?

Under normal circumstances, the moderator processes posts at least once per day.   If 48 hours have passed since you posted a message and it hasn't appeared, check to see if you have received a rejection notice from the moderator.  If not, make sure that you posted the message using a replyable address.  If you did, then
contact the moderator.

0.6.3 How can I contact the moderator?

The moderator, Charles Calvert, can be emailed at accm_mod@celticwolf.net.

0.7 Can I find a job through this newsgroup?

While this may happen occasionally, explicit job-hunting is not the purpose of this group and blatant ads by job-seekers or people seeking employees are strongly discouraged (even brief postings seeking consultants).  Otherwise, examine the list of newsgroups at your site for appropriate groups with "ads", "contract" or "jobs" in the title.  There are many such groups, and some are localized or specialized so that appropriate choices will improve your chances of success.

0.8 Where can I get more information on related topics?

Ric Goldman maintains an ACCM directory at http://timelord01.home.sprynet.com/accm, intended to contain materials or pointers to helpful materials.  Please email information or suggestions for the directory to splbndr@mindspring.com.

For tax information in the U.S. you can call the federal IRS at 1-800-829-FORM to order copies of forms and publications. A good start is Publication 334 (Tax Guide for Small Businesses), Publication 583 (Taxpayers Starting a Business), Circular E (Employer's Tax Guide), and Publication 910 (List of Free Taxpayer Services).  If you have specific questions, call 1-800-829-1040 and be prepared to hold for 20 or 30 minutes.  Also check their website at http://www.irs.gov/.

Back to Table of Contents


1 About Computer Consulting

1.1 What is a consultant?

A consultant is a person with a measure of expertise in a specialized area who earns fees from clients who engage him/her to solve problems in their organization.  A consultant is a problem solver.  A consultant is a system designer.  A consultant is a specialist (although the specialty may be quite broad).  A consultant works under essentially no supervision, and takes only broad direction from his/her client.  A client usually engages a consultant because the client doesn't know how to solve the   problem and requires the experience that a consultant can bring to the solution.

A consultant is one who either identifies a problem and proposes a solution; or who proposes a solution to a problem the client has already identified; or who does an analysis of a specific nature to pinpoint a problem the client has identified in general and then proposes such a solution.

1.2 What is a contractor?

"Contractor" describes a legal relationship, and has nothing to do with whether you build houses or give advice.  A consultant is often on contract, and therefore is then also a contractor.

1.3 What are the differences between a consultant and contractor?

If you believe an important part of your service is to provide advice, mentoring and technical leadership, you should call yourself a consultant. In addition to being a consultant, you may also be involved in a craft such as programming, writing, researching, training etc, etc.  Your role as a consultant is separate from your legal relationship to your client and from your craft.

In a nutshell, a consultant tells you what to do, a contractor does it for you.

That said, amongst consultants themselves there is tendency to separate the two based on whether the relationship is direct or indirect.  Under this scenario, a "consultant" typically does their  own sales and marketing, finds their own jobs, negotiates their own contracts, does the work, and gets paid directly by the client (sometimes called 1099 or Corp-to-corp).  A "contractor" typically does uses a third party (such as a broker or body shop – see section 3.4.) to do sales and marketing on their behalf, to find their next job for them and to negotiate contracts with the client.  The contractor signs a contract with the third party, does the work and typically gets paid on a W2 by the third party. Ultimately it usually comes down to two questions: (1) are you doing your own marketing of yourself and finding your own clients or are you letting a third party do so? (2) are you getting paid directly by the client through a 1099 or indirectly by a third party as either a W2 or a 1099? Some people are comfortable with doing their own sales and marketing, some prefer someone else to do it for them. Some longer-term contracting positions include benefits (many do not); "consultants" find and provide their own.  Some people view “consultants” as higher status as “contractors”, but in fact there can be a mix and match between work done, 2- or 3-party relationships, and the tax status., so many consider these differences as artificial.

1.4 What kind of work do computer consultants do?

Anything and everything information technology (IT) related. Programming, analysis, design, systems administration, support, database administration (DBA), hardware/software engineering, and anything else related to computers. Most consultants focus or specialize in one or a few areas.

1.5 What should I have to get started as a computer consultant?

Think about these before you strike out on your own:

The first and most important step is deciding you want to run a business.  Many people starting out as a computer consultant don't want to think of the business aspects.   They start out ad-hoc and after a few months find themselves failing.  They place blame on everything but where it belongs - if you're going to work as a consultant, you must be in business for yourself.  As a computer professional, you would never sit down to write a major program without some sort of plan to do so. Why would you try and start your own consulting business without such a plan?

Some people are forced into consulting by layoffs. Instead of spending a few days to establish a reasonable business plan, they panic and try to immediately find their first contract. A few extra days of planning first can provide large pay-offs down the line.

The first question is 'What do you want to do?' "Consulting" is not an answer. What type of consulting? Doing what type of work? Who's your target market? What work will you perform and what work won't you take? How much travel will you do? Will you work out of your house or rent space? What equipment and infrastructure do you need at either location? A few days deciding these and many other critical issues will provide a much better background to move forward.

The next issue is deciding to act as a business. This means developing boilerplate contracts, invoicing clients, marketing yourself, all the day-to-day minutiae involved in running a small business. None of this is as interesting as hacking about in Java but it is necessary to survive. Some of the more detail oriented of you might want to develop an entire business plan. While a one-person start-up business does not necessarily need a full business plan, thinking about the questions and issues writing such a plan entails may provide a good overall framework as to the mindset necessary to run a business.

1.5.1 [US] What do I need to look like a business?

A few trappings can go a long way to giving your efforts the look-and-feel of a business, even if you are a one-person effort:

1.5.2 What equipment do I need?

[Gem of wisdom needed here]

1.5.3 What other supplies do I need?

[Gem of wisdom needed here]

1.5.4 How do I get my first contract?

[Gem of wisdom needed here]

1.6 What other consultanting activities should I consider?

In addition to the traditional technical work, adding other ways to make money helps provide a cushion to slow times and can help you market yourself:

Back to Table of Contents


2 Organizing your Business

2.1 [US][UK] What is a Sole Proprietor (Sole Trader)?

This is the self-employed person. Advantages are that you have the freedom that comes from owning the business yourself, some advantageous treatment for tax purposes and less onerous requirements for accounts than other business forms. The main disadvantage is that you are responsible for the debts of the business in full. The law makes no distinction between the business and your personal property.

2.2 [US][UK] What is a Partnership?

This is very similar to sole proprietor/trader status, but for multiple persons.   Serious difficulties can arise on the death of a partner or the breakup of the partnership.  To overcome this, it is essential to have a watertight legal partnership agreement. For tax purposes, the income/debt of the business is proportionally allocated to the individuals in the partnership.

2.3 [US][UK] What is a Limited Liability Company?

[US] Limited liability companies, or LLCs, combine the personal liability protection of a corporation with the tax benefits and simplicity of a partnership. However, there are still other important differences. The following discusses the main advantages and disadvantages of corporations against LLCs.

[UK] You can trade as the director of a limited company, in which your  liability is limited to the extent of your investment in the company itself. You are then an employee of the company. The law requires full  accounts to be prepared and filed each year, resulting in higher accountant's fees than for the sole trader. Although in law small companies (under a certain annual turnover) no longer have to have their accounts audited, others, such as mortgage lenders, may require this. Note that most lenders will not lend to a small company unless the directors make personal guarantees, which rather defeats the advantage of limited liability.

2.4 [US] What is a Corporation?

A Corporation is a separate legal entity with its own identity separate and apart from its shareholders (owners of the business). As a separate legal entity, a corporation is responsible for its own debts. A corporation can own property, enter into contracts, and conduct business under its own name.

2.4.1 [US] What are the (dis)advantages of a corporation?

Advantages of a corporation:

Disadvantages of a Corporation:

2.4.2 [US] What can I name the Corporation?

The owner can chose any name for your corporation that you prefer, however, the name must not be the name of an existing corporation, i.e., the name must be distinguishable.   Additionally, "Inc", "Co", "Incorporation", "Corporation", "Company", "Limited", or "LTD" must follow the corporate name.

2.4.3 [US] What is a registered agent?

If required by your locality, a registered agent is responsible for receiving any legal documentation on behalf of the corporation.  Quite frequently, YOU can act as your own registered agent as long as your address is within the locality that you are incorporating in.

2.4.4 [US] What is an S corporation?

An S corporation is the election of a special tax designation which must be applied for and granted by the IRS to corporations that have already been formed. This election, in general allows for the income of the S corporation to be taxed to the shareholder of the corporation as opposed to the corporation per se.  The primary advantage of an S corporation is the avoidance of double taxation. That is, the avoidance of payment of income tax on corporate net income, and then the payment of a further tax on the dividend income that is derived from the corporation.  Thus, an S corporation allows certain income, deductions, and losses to be passed through the S corporation to the individual tax return of each shareholder.

2.4.5 [US] What's the difference between a "C" and an "S" Corporation?

C-corporations are subject to double taxation; that is, one tax at the corporate level on the corporation's net income, and another tax to the shareholders when the profits are distributed to them. S-corporations, on the other hand, have only one level of taxation. All of their income is allocated to its stockholders. However, C-corporations have greater tax planning flexibility and can shield stockholders from direct tax liability. In addition, S-corporations are subject to limitations, such as the number and type of stockholders it can have.

2.4.6 [US] Should I incorporate?

This is a complex question that should be answered only by competent legal and tax professionals who know your particular business situation.  We invite such professionals to submit discussions of this question for inclusion in this FAQ.

2.5 [UK] What is a Cooperative?

This is not likely to be of interest to most consultants, but some members have reported trading with this status. I would welcome it if they could write summarizing the advantages and disadvantages.

2.6 [US] What about being an employee of another organization?

There are usually two situations where a consultant is an employee.  First is where the consultant's business has incorporated, and the consultant is an employee of that corporation.  This allows clients, agencies, and other business entity to deal with the consultant's business entity.  Such interactions are typically called Corp-to-Corp.

The second is where the consultant forgoes the trappings of their own business, instead choosing to work for another company.  This other company (called a broker, agency, or consulting company) performs all the business aspect of negotiating with the end client and finding work for the consultant.  However, there are usually fewer or less robust benefits for the consultant/employee, and the employment may terminate if the project or work for which the consultant was hired is completed.

2.7 [US] Why do some clients only work with incorporated consultants?

This is mainly a tax concern.  Some clients have been burned either by "independent" consultants working on long term projects who turn around and place a claim on the client for benefits.  Other are concerned that the state or federal government will reclassify an independent consultant as an employee of the client and then require back payroll taxes (and penalties) of the client.  As a result, many clients want their consultants to be an employee of someone, other than themselves.

Consultants solve this either by incorporating themselves, or by working as an employee of some 3rd-party.  In other cases, a consultant will be forced to work through or hire on as an employee of one of the client's "preferred vendors" who have met certain criteria of the client, including taking responsibility for exposure regarding payroll taxes.

2.8 [US] What are the advantages/disadvantages of working W2, 1099, Corp-to-Corp?

W-2 means that you are working as somebody's employee.  While it applies to someone who is a full-time employee of a company, it is more commonly used to refer to consultants who operate as migrant employees, going from temporary job to temporary job. 

1099 and corp-to-corp are two varieties of independent contracting. In both cases, the person has his own business, but in the first case he owns the business (its assets are his assets, its liabilities are his liabilities), while in the second case the business is a separate legal entity (and he is liable only for what he paid to acquire its stock). A corporation can be formed as either a C-corp or an S-corp, but the distinction only affects how it is treated for income tax purposes.

The principal disadvantage of working W-2 (i.e., as a migrant employee) is that you don't have a permanent job. You are likely to be treated like an employee (e.g., you are likely to work full-time, onsite, for one client at a time), but you have a job that literally goes away every 6 months or 12 months or whatever. You may not get any paid vacation or sick time. You may not get any benefits (and, if you do, they are likely to go away or change every time a contract ends). Any unreimbursed expenses will be treated as Miscellaneous Deductions on Schedule A of your income tax return (if they are deductible at all) where they will be subject to a floor of 2% of adjusted gross income and will benefit you only to the extent that your total deductions exceed the standard deduction. And you don't have a business in which you can build equity.

The principal advantage of working as an independent contractor is that you have your own business. Most business expenses are fully deductible, and reduce your FICA income as well as your 1040 income. You have the ability to set up benefits of your own that will remain intact regardless of what contracts you are servicing. You are also less likely to be treated like an employee and more likely to have control over where, when, and how you work. You may be able to service several clients at a time, which will increase your financial stability (i.e., if you lose one of your clients, you only lose a fraction of your revenues). And you will have a business in which you can build equity. As an independent contractor, you will have to pay both the "company" and the "employee" part of FICA (whereas, if you work W-2, your employer will pick up the "company" part of FICA). But, because of this, independent contracting work normally commands a higher rate than W-2 work, so you will usually break even.

Whether you work 1099 or as an S-corp or as a C-corp is a more complex problem.   Incorporating, in principle, provides you with some liability protection. But the protection a corporation is designed to provide is for the stockholder(s), not the employees of the business. As the sole stockholder of a C-corp or S-corp, your personal assets are protected if your business is sued. But you can also theoretically be sued personally as the CEO and as the employee who did the work, in which  case your personal assets are at risk. Such suits are also possible for large corporations like AT&T, but they are rare because (1) it is difficult to assign blame, and (2) the "deep pockets" principle favors going after the corporation. But it is very possible that neither of these things will be true for your corporation. Also, the assets of the corporation may include things you wouldn't want to lose (e.g., it may be little consolation to have your personal assets protected if you lose the multi-million dollar software product your company was working on!). Consequently, some lawyers recommend that you protect yourself, instead, with properly worded contracts.

The paperwork is simpler if you work 1099. But you may find that some clients are wary of working with you if you aren't incorporated. (I know, it's weird! They feel safer if they CAN'T sue your business and take all of your personal assets than if they CAN.) A compromise may be to organize as a Limited Liability Company (LLC), which has simpler paperwork, provides liability protection, but sounds official enough to tranquilize potential clients who are afraid of working with sole proprietorships.

I would strongly recommend that you consultant with a lawyer and/or a CPA before decided to organize as a C-corp, S-corp, LLC, or sole proprietor, since there are many things to consider, and the details vary from state to state. Also, some things are changing (e.g., it used to be that you couldn't deduct health insurance premiums your company paid for you unless you had a C-corp, but a 1040 deduction for this is gradually being phased in, and is due to be at 100% in a few years).

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3 Running your Business

3.1 What are the considerations of having multiple contracts?

If you work on more than one contract at the same time, it is possible to be self-employed for one and employed for another.  However it's important to make sure that aspects of the contracts do not conflict with one another, or with any employee agreement you may have.  In addition, make sure you can adequately service the needs of multiple clients responsibly at the same time.

3.2 What is moonlighting?

Moonlighting is practice of taking on a second job or activity, usually on top of a regular full time job.  Many consultants got started by doing moonlight contracts as a starting point before making it their main business instead of an employee job.

You should check your contract of employment: this may entitle your employers to benefit from work that you do outside working hours (such as patents and copyrights) or it may prevent you from doing any work that your employer regards as competition. Most universities and colleges now have employment contracts that regulate outside consultancy.   Also, if you leave/terminate your employment, check to see if your employment contract has restrictions on what you do and where for some time after you leave employment to become a consultant.

3.3 What are the considerations of having part-time contracts?

Part-time contracts may be sufficient for the amount of work you wish to do.   Certainly you look more like a business, servicing one or more clients on a part-time basis than if you only have one single client who commands your full-time effort on an exclusive basis.   Time-management often seems to be the major consideration in this situation.

3.4 What are Direct vs. 3rd-party contracts?

When a consultant enters into a two-party agreement with a client, this is often referred to as a Direct contract.  If the consultant has entered into an agreement with an agency, broker, or umbrella company, either in lieu of or addition an agreement with the client, this relationship is usually called a  3rd-party contract.

In some circles, "consultants" are considered to only have Direct contracts and "contractors" are those engaged in 3rd-party contracts or as employees of 3rd-parties.  Technically, these are not accurate representations of the terms, but they do persist.  Be sure everyone agrees to what the terms mean or imply.

If you normally work as an independent, but temporarily take a contract through an agency or as an employee, you should take professional advice on your
situation.  An accountant has recommended that, to protect your self-employed status, your contract with the agency (a) does not restrict you to working for the agency's client and (b) specifies that the normal place where the work will be done is your normal place of  work, not the client's (if possible).

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4 Accountants and Attorneys

4.1 Do I need an accountant?

Yes!  To be confident that you are not going to fall  afoul of the tax man and the law you really should refer to an accountant.

When you set out, and beyond that, you will need the help of a good accountant (note that there are a lot of bad accountants out there!).  Interview her or him intensely before you commit yourself. Weigh up the advantages and disadvantages: has s/he worked for many people in your own position, is a local accountant better than a specialist who is not local, and so on.

4.2 What can an accountant do for me?

An accountant can advise you on the pros and cons of how to set up your business (see Section 2).  In  they can advise you on matters involving taxes, recordkeeping, financing, financial reporting, banking, payroll, employees, and how these will impact your business.

4.3 How much can I expect to spend on accountant fees?

Expect to spend more starting out, and then less on a quarterly basis. Initially it depends on what you're asking the accountant to do. If they are setting up an accounting package for you, it will cost more. If it's just a discussion of taxes, it will be less. Fees are typically in the low three figure range (i.e. $100-$200 per hour). You can help keep these down by being organized. For example, you'll typically go in on a quarterly basis the first few quarters to have the accountant review your books. If you've kept everything coherent and up-to-date, it will be a less expensive visit than if you walk in with everything in a shambles.

4.4 How do I find an accountant?

First, look for an accountant who specializes in consultants, or at least in small businesses. You need someone familiar with small business problems. Ask your peers. Post a query on accm. Ask at the next ICCA local meeting. Ask your peers. Ask your attorney.

4.5 Do I need an attorney?

Yes!  If you choose not to retain an attorney, at least find some kind of legal clinic or other service which you can refer to when legal matters come up.   Unfortunately, "ignorance of the law" is not an excuse when it comes to dealing in the business world.

Lawyers are expensive. Good lawyers more so, but it only takes one contract issue and the resulting loss of revenue to cost you far more than an occasional consultation with a good business contract lawyer.  Further, how well you negotiate contracts with clients speaks to your professionalism as a consultant just as much as how well your delivered programs run.  Knowing that the contract you signed is fair to you as well as the client, and knowing that if it comes down to serious legal contention between you and an annoyed client that the contract you signed backs up your rights is why you pay a lawyer. It's a matter of risk management. Some people prefer to not pay a lawyer and accept the higher risk; others prefer to pay the lawyer and reduce their risk.

4.6 What can an attorney do for me?

Like an accountant, an attorney can advise you on consideration for how you set up your business (although you may want someone who specifically is a "Tax Attorney" for this).  However, their main benefit is in dealing with contracts on your behalf.   They can review contracts you receive from others and help "translate" them, as well as suggest clauses or considerations to include to protect or benefit you.

A good business or contract lawyer can help you create standard legal agreements for your consulting business (contracts, non-disclosures). They can review clients' proposed contracts and suggest which language to remove, which to add, and which to modify. They can give you background on why that paragraph is a bad idea to leave in the contract the client handed you. Finally, business practices and the law varies between each state in the US. That's why "generic" contracts you find need to be tweaked to meet the legal requirements in your state.

4.7 How much can I expect to spend on legal fees?

A good business or contract lawyer will likely charge three figures per hour (i.e., $100-$300 per hour). However, there are things that you can do to reduce their charges. First, review the references in section 12.5 for standard contract language (see especially Fishman). Take one of these to the lawyer and have them modify it as appropriate for your business and your state. After that, you can use the same contract (or with minor modifications) for most if not all of your business (depending on whether your contracts are all alike or if each one is different).  Initially when setting up your business expect to spend anywhere from 10-20 hours getting everything set up, and then maybe 1-3 hours per client if you need to tweak a contract or review a client's proposed contract.

All this does not apply to the one time costs of incorporation.

4.8 How do I find an attorney?

You need a lawyer who is familiar with business contract law.  This is usually not your personal attorney who drew up your wills; you need a specialist - not unlike looking for a specialist in computer consulting. First, ask you peers. Post a query to accm. Ask at the next ICCA meeting. Ask your friends in computing. If you already have a personal attorney, ask them. Ask your accountant. Finally, you can call the local bar association and ask for a list of lawyers who specialize in contract law for small businesses.

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5 Legal issues

5.1 What legal liabilities might I incur as a consultant?

A consultant has all the legal liabilities under contract law that any other business has, including breach of contract.  Consultants often undertake to establish or modify mission critical systems that the client may depend on to operate the client's business.  A client could claim that their business was damaged, or substantial revenue was lost, as a result of the system's failure to perform properly or in a timely fashion. Thus, a consultant, under some circumstances, might be sued for amounts much greater than the value of the consultant's work.

For this, and other reasons, it is especially important that a computer consultant should thoroughly understand the nature of his/her potential liabilities.  This is definitely not information to be gleaned quickly from a FAQ.  There are books available, covering various legal jurisdictions, and a computer consultant should have contact with a lawyer who reviews contracts and provides advice in particular situations.

5.2 [US] Who owns the code I write for a client (copyright)?

In the US, with computer programs, as long as there is NOT an employment relationship, and the copyright was NOT purported {handed over to} the client, the programmer retains all copyrights.  These are the two main factors that come into play with commissioned work such as computer programs.  A case citation for determining an employment relationship is a supreme court case decided in 1989 about a commissioned statue. (Case citation: 490 US 730 1989)

Contracts can be crafted to say anything you want them to.  Naturally, a consultant would do best to negotiate a contract that gives him/her the copyright in all works created.  However, this is not the norm. Most companies that hire contractors have carefully written contracts, and they give ownership to the company.

When you are writing source code for a client, consider whether or not you desire to retain copyright.  If that matters to you, discuss it with the client, and pay for legal advice and assistance drawing up a contract that protects your interests.

5.3 Should I work under a contract?

Yes, Yes!, and YES!  (See 5.1)

If you are in the situation that you need to start work without time to exchange contracts, I am told that the following procedure may cover you legally. Send a "Letter of Intent" stating that you will work for the first week under the terms agreed on the telephone, which you then describe in the letter, but without any obligation to continue after the first week. Renew the Letter of Intent for another week if necessary. Do not use this method if you are in dispute over the terms of the contract.

5.3.1 What contract clauses should I consider?

[Gem of wisdom needed here]

5.3.2 What contract clauses should I look out for?

Contracts offered by agencies or clients can include a wide variety of restrictive clauses that go against a consultant's interests. These clauses may relate to notice
periods, liability, non-competition, ownership of work-products, ability to redress disputes, and other matters. Always read the contract carefully and *never* sign anything you're not happy to be held to. *Never* start work without finalizing the contract first, as starting work can be construed in law as agreement. *Never* assume that any clause is unenforceable in law.

If faced with a contract with an unreasonable clause, speak to the agency or client about it, strike it out or amend it (initial the changes) and send the contract back. In most cases, the agency or client will accept the change, or at least be willing to negotiate on it. In some cases, you may be able to provide your own contract if you offer it. When in doubt, get legal advice.

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6 Tax issues

6.1 [US] What is 1099 vs W2 status?

Employees are given wage statements on IRS W2 forms.  Independent contractors (ICs) receive 1099 forms listing moneys paid to them during the course of the year.  Employees have federal, state and local taxes, as well as social security, pre-computed and withheld.  ICs do not, and must compute taxes due and submit them themselves.  IC's must pay both halves (employer and employee) of the social security tax themselves.  Employees are also eligible for overtime pay, vacation, sick leave, Family leave, and other benefits that IC's are not.  IC's are working for themselves, not for a particular company.  See also section 2.8.

6.1.1 [US] What is independent contractor status and how can I protect it?

It is important to be able to prove to the IRS that throughout the relationship you are conducting an independent and real business.  Working for multiple clients simultaneously, and advertising your future availability to other clients while working on any exclusive contracts are recommended. You should strive to have good accounting and documentation practices so that in the event of an audit you are seen to be professional.

The IRS discusses how it looks at a consultant/client relationship at http://www.irs.gov/prod/tax_edu/teletax/tc762.html.

6.1.2 [US] What are the "IRS 20 questions" for?

The "20 Questions" are a paraphrased version of what the IRS uses to determine if you are an independent contractor or an employee.  The complete text is available on IRS form SS-8 (which you can file with the IRS and let them determine your status).  The form can be found at http://ftp.fedworld.gov/pub/irs-pdf/fss8.pdf

The 20 questions exist also to protect individuals from being taken advantage of by large companies.  Without them, the protections guaranteed to employees such as unemployment insurance, workmen's compensation, social security, paid overtime, non-discrimination, and right to organize unions would be worthless.

It is not just the IRS that is concerned about these issues. A bigger concern for the client is legal liability.  If you have someone on site for a long period, and that person is seriously hurt, they are *VERY LIKELY* to file for workmen's compensation, and claim that they are a common law employee.  If their contract ends after a long period, and they can't find work, and can't pay the mortgage, they are likely to file for unemployment insurance.

When retirement time comes around, they may try to force past clients to pay social security payments they "should have received" under common law.

If you are acting like a business, then you have a company phone, designated office space, large accounts receivable, a profit risk, ongoing expenses for accounting, insurance, and legal advice, significant investment in software and hardware necessary for business, multiple clients, and you spend lots of time seeking new business, then you will have no problem with the 20 questions!

6.1.3 [US] What are the IRS 20 questions?

Here is the text of the 20 questions:

  1. Is the person providing services required to comply with instructions about when, where, and how the work is to be done?
  2. Is the person provided training to enable him to perform a job in a particular method or manner?
  3. Are the services provided integrated into the business' operation?
  4. Must the services be rendered personally?
  5. Does the business hire, supervise, or pay assistants to help the person performing services under contract?
  6. Is the relationship between the individual and the person the performs services for a continuing relationship?
  7. Who sets the hours of work?
  8. Is the worker required to devote his full time to the person he performs services for?
  9. Is the work performed at the place of the business of the potential employer?
  10. Who directs the order or sequence in which the work must be done?
  11. Are regular oral or written reports required?
  12. What is the method of payment-hour, week, commission, or by the job?
  13. Are business and/or traveling expenses reimbursed?
  14. Who furnishes tools and materials used in providing services?
  15. Does the person providing services have a significant investment in facilities used to perform services?
  16. Can the person providing services realize both a profit or a loss?
  17. Can the person providing services work for a number of firms at the same time?
  18. Does the person make his services available to the general public?
  19. Is the person providing services subject to dismissal for reason other than nonperformance of contract specifications?
  20. Can the person providing services terminate his relationship without incurring a liability for failure to complete a job?

6.1.4 [US] What about recordkeeping?

Everyone in business must keep financial records. Good records will help you do the following:

In addition to these, you may also need timekeeping and activity records of work being done to support invoices you submit to clients for payment.

6.1.4.1 [US] What items/expenses should I keep track of?

Except in a few cases, the law does not require any special kind of records. You can choose any recordkeeping system suited to your business that clearly shows your income.   Your recordkeeping system should include a summary of your business transactions. This summary is ordinarily made in your books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checkbook is the main source for entries in the business books.

Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books.

You can get a first idea about reporting business expenses on the IRS form Schedule C which is used for Sole Proprietors.  The form is available at http://ftp.fedworld.gov/pub/irs-pdf/f1040sc.pdf.   For more details specific to your business, consult an accountant.

6.1.4.2 [US] What about home-office issues?

Your home office may be in a house, apartment, condominium, mobile home, or boat. You do not need to own the home in order to claim an "office in the home" deduction. In addition, a garage or storage area can be considered when determining your deduction.   The IRS says to qualify for the deduction, you need to meet four tests. You can deduct the expenses related to your home office if your use is:

You will need to consider the costs of taking care of your home and the cost of taking care of your office. For all of the expenses, you must maintain adequate records to support the deduction.

Some expenses can be deducted even if you do not have a qualified home office. These costs should be deducted as normal business expenses and not included in the home office deduction:: office supplies, office wages, separate business telephone line, and depreciation on office equipment & furniture (with limitations) .

Some expenses can't be deducted even if you have a qualified home office. These costs are always considered personal, and can't be deducted: the first telephone line into the house, maintenance of your yard, repairs & maintenance to areas of your home not related to the office.

Some expenses of maintaining your home will be partially deductible when you have a qualified home office, usually allocated based on how much of your house is used for the home office:

6.1.5 [US] What is the "self-employment" tax?

As an employee, a contribution for social security is withheld from your paycheck.   This is normally referred to as FICA.  Your employer also makes a contribution, called FICE.  As a self-employed person, you are responsible for both part of the contribution.  Hence, the self-employment tax.

You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more.  Generally, net earnings from self-employment represent 92.35% of your net profit. Net profit is calculated by subtracting ordinary and necessary trade or business expenses from your total self-employment income. You are self-employed for this purpose if you are a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself.  You can be liable for paying self-employment tax even if you are currently receiving Social Security benefits.

6.2 [UK] What kinds of consultants are there from a tax standpoint?

As far as the taxman is concerned, there are basically two kinds of consultant: self-employed (Schedule D) and employed (Schedule E).

6.2.1 [UK] What are the considerations for Self-employed?

This is the status of a sole trader or partner. You pay tax on demand based on your tax return at the end of a year's trading. You also pay Class 2 NI contributions (much less than Class 1) and Class 4 contributions on any profit over a certain level. Your NI contributions do not entitle you to benefit in case of unemployment.

It is the taxman who decides if you are self-employed or not. This decision is based on various criteria, including whether you work for more than one client at a time, whether you work on your own premises and equipment or your client's, how much control the client has over your work, and so on.

If you leave employment and expect to be self-employed, you are legally required to inform your Inland Revenue office and the Department of Social Security. Both will send you forms to fill in.  The Inland Revenue (at http://www.inlandrevenue.gov.uk/) publishes a number of useful leaflets in the Business Series, including:

A Self-Assessment system started in 1997 for all self-employed people as well as to anyone else who completes a tax return form. At the same time, the basis on which sole traders are taxed changed (from previous year's profits to the current year's). This is described in publications available from the Inland Revenue.

6.2.2 [UK] What are the considerations for Employed?

If you are employed, you pay tax by Pay-As-You-Earn (PAYE) and NI at the Class 1 rate, whether you are employed by your own company, someone
else's company, an agency or the client.

From April 1996 there is a legal obligation on all employees to maintain complete records to enable completion of a tax return if required. These records must include anything relating to pay, benefits, expenses, interest, dividends and share options. The records must normally be kept for 22 months, but may sometimes have to be kept longer. The Inland Revenue issues a leaflet on the subject.

6.2.3 [UK] Should I have Company directors?

Having your own company allows you some flexibility to decide whether to pay yourself a salary or in dividends, but the tax advantages of this are likely to disappear in the near future. You should offset this against the higher cost of running your own company.

For company directors, there is an obligation to pay tax and NI liabilities of all employees to the Inland Revenue within 14 days of payment of salary, and to pay Advance Corporation Tax on dividend distributions. Directors' NI is calculated differently from that of other employees. The law is complicated, and the Revenue's package of informational leaflets and forms is, to say the least, weighty. Advice from an accountant or other qualified person is almost essential.

Although as a director you pay Class 1 contributions, you will probably be treated most unsympathetically at the Benefits Agency if work dries up and you go to sign on. They consider that you cannot make yourself unemployed.

6.2.4 [UK] What is VAT?

All businesses with a turnover over a certain amount are obliged to register with HM Customs and Excise for VAT. Below this limit, it is not obligatory to register, but you may apply to the Customs and Excise for registration.

If you work mainly for clients who are themselves registered, they will prefer you to be registered. Registration has the advantage that you can claim back VAT that you have paid on equipment and supplies, so you may actually receive a rebate in your early quarters of trading. Having a registration number is also a useful indication to others that you are a bona fide business.

If you register you must keep accurate records, make quarterly returns to a strict timescale and keep your records for occasional inspection.  Small businesses can use the "cash accounting" scheme, which means that you settle the VAT liability when your invoice is paid, not when you issue it. For further information, in the first instance, contact your local VAT office under Customs and Excise in the phone book.

6.2.4.1 [UK] Should my business be VAT registered?

This is best answered by a professional who is aware of your detailed circumstances.   However, it is almost certain that you should register ('should' either because you will be legally obliged to do so, or because it will be monetarily advantageous to do so).

If your turnover exceeds certain amounts, either within a quarter, or within a year, you are obliged to register.  The limits are changed from time to time, but if you are working as a full-time consultant or contractor it is very likely you will exceed those limits.  See "rates" ;-)

The only disadvantage is that there is some more paperwork to fill in and you must be very careful to keep good records, and reasonably up to date.  Customs & Excise (who administer VAT) have very far ranging powers (including bailiffs).

All your clients are likely to be VAT registered.  In this case there is no disadvantage for your clients.  If you would bill such a client 100 without VAT, then being VAT registered means that you bill them 117.50 with VAT (at the current rate).   Does that mean your higher price will frighten them off?  It shouldn't, because the client's accounts department will reclaim the VAT, so that they end up with your service costing 100 anyway.  In larger companies, some middle managers may not understand this, especially if you are also unconfident about it.  Normally people quote their rates without including VAT, and say "plus VAT".

The benefit to you is that, if you purchase items necessary for your business (perhaps a computer, office furniture, letterheads, business cards, services such as accountancy, etc) you can reclaim the VAT.  Indeed, it's even possible, if you're profligate and not doing sufficient billable work, to reclaim more VAT than the total on your outgoing invoices.  In which case the VAT office is very prompt about repaying you!  Try it several times running and, of course, they call round to see you -- perhaps they're just being helpful and trying to improve your marketing skills.  ;-)

If you have clients outside the UK, you should bill them without charging VAT.  Again however, that's something to check with your accountant or the (helpful) people at the local VAT office.

After you've been trading for a while, you'll receive a phone call from "the VAT man", requesting an appointment to come and look over your books.  This is quite a thorough review.  Don't attempt to reclaim VAT on anything that you don't have a VAT receipt for, in other words a receipt that has the supplier's VAT number on it.  And don't attempt to reclaim VAT on things that don't carry it.  Even if it's just some postage stamps, the VAT inspector will spot it, and courteously slap your wrists!  At the same time, I have to say that the inspections I've received have been remarkably fair -- I've ended up with sufficient unclaimed VAT being brought to my attention to offset my inadvertent erroneous claims.

Don't be late paying your VAT.  Even if you have cashflow problems, keeping the VAT people happy should be a very high priority.  They'll charge you interest if you pay late (entirely fair, since they're very prompt about paying you if the need arises), and they have immense powers to take away their pound of flesh.

(This advice has been given by a UK resident who is NOT an accountant.  Also keep in mind that even in the unlikely event of it being correct when written, the rules do keep changing.)

6.2.4.2 [UK] Should I register for VAT by "cash accounting"?

Usually a good idea.  Means that if you have any bad debts you don't have to pay VAT on them.  Means if you have slow payers you don't pay over the VAT until the money comes in.

6.2.5 [UK] Should I trade myself as a registered company?

This is part of the start up question.  There is a lot of free information and help available, enterprise agencies etc.  Your local chamber of trade should be able to point you in the right direction. Look in the Yellow Pages under "Chambers of Commerce & Trade" and "Business Enterprise Agencies".

When you set up in business in the UK you have to choose how you are going to trade and how you are going to pay your tax & national insurance. These two issues are different but related.  The law and regulations keep changing and you can get out of date quickly. For example, from this year small registered companies do not need to get their accounts audited.

You can trade as a registered company, sole trader or partnership.  The set up which is best for you depends on the clients you want to attract, and the relationship you have with any colleagues.  To register a company name, you can buy a company off the shelf at rock bottom prices or set up your own company for not a lot more.

You can trade under a name other than that of your registered company without registering the alternative name.  The only accounting costs are new stationary and notifying your customers that you have changed.  This is useful either if a) you buy a company off the shelf with a company name which doesn't help your a professional image or b) you set up a company with a chosen name and later find a preferable name.

Potential disadvantages of registration:

6.2.6 [UK] Should I pay self-employment or full class N1 stamp?

There are several grades of National Insurance "stamp".  So far as National Insurance and tax is concerned, self employed status is determined by the "stamp" which is paid.

Class 1 is the most expensive and is paid in two parts by the employer on behalf of employees based on how much they have earned.  One part, the Employee's Contribution, is deducted from the employee's gross pay.  The other part, the Employer's Contribution, is paid by the employer and is an addition to the wage bill.

The self employed stamp costs less and there is obviously no Employer's Contribution.  Consequently the DSS and tax man believe that these stamps are open to abuse by employers who try to pass their workers off as self employed as a means of avoiding the Employer's Contribution.

To help you decide if you are self employed or an employee of your client, the DSS have issued a leaflet "Employed or self-employed" (IR56/NI136). It contains two lists of questions. It says you are "probably" employed if you answer YES to one list of questions and "probably" self-employed if you answer YES to the other list.  It says that, if you have several clients, it is possible to be an employee of some and self-employed for others. There appears to be no certainty in this process.

From your point of view, the key to this issue is that they want the full stamp if you are an employee.  Consequently, you can decide to trade as a limited company and pay the full class one stamp.  It is more expensive but you don't have to waste time arguing about whether you are self employed or not.  There is also the school of thought that if your turnover is so small that the marginal NI cost makes a difference to your comfort, then perhaps you should return to permanent employment.

Back to Table of Contents


7 Financial issues

7.1 How can I collect unpaid invoices from clients?

In a large client, normally the purchase department which issues the order and the accounts department which processes your invoices are entirely separate from the department for which you do the work.

If there are any delays getting the order which you know has been raised or getting payment, your greatest allies are your contacts in the department which placed the order (the customer contacts).  They prefer to use the devil they know and unless you have completely messed things up they won't want to lose you because of hassle with other departments.  So, as soon as a client shows any interest, phone his company's accounts department and ask how soon they pay invoices submitted a) at the start of the month and b) at the end of the month.  (Some companies only pay when a number of complete calendar months have passed.)  Make sure you get the name of the person you speak with.

Unless you are working for a very small client, it is normal to receive a purchase order, and unwise to start work without one.  When working for small business clients, it is advisable to prepare a work order (also known as a Statement of Work or a specification) in advance, outlining the task to be performed and your precise responsibilities.  Have this signed by the client before beginning any work.

When your customer contact says that the order has been raised, tell him that you are prepared to proceed as soon as you know order number.  Say that you can start immediately if he can phone the order number to you.  Don't start work until you know what the order number is.  You could send him a letter or fax stating that as a result of your phone call with him you understand that the order number is xyz and that on that basis you are starting work on the order.

Many smaller businesses who need your services will not bother to write up an adequate (or any!) job specification.  When working with such a business, consider writing _your_own_ contract, in  the form of a "work order" (or Quotation or Proposal) and presenting it to your client for signature.  This will give you a little more control of your situation, and the same legal protection as a "client proposed" contract.

You should not be afraid to phone the customer's accounts department to find out when you should expect payment.  When you do this, however, be polite.  Remember that the people you speak with are only doing their jobs, and if they are telling you something which upsets you, it's unlikely to be their fault.  You can of course refer to earlier calls to the accounts department which painted a different picture.

It's sometimes worth calling the accounts department before you expect the payment.  This is particularly the case with new customers or customers (and there are some) who only pay when you phone them up.  If it becomes apparent that payment will be delayed, phone your most senior customer contact and explain the situation (they often won't be aware of the problem).  Ask them if they can get things moving from within the company.

Never threaten your customer contact with, for example, withholding work as a means of getting payment.  Delayed  payment is not normally his fault.  Such threats will alienate him; you lose your best friend and will minimize your chances of getting paid.

Find the name of the person in the organization who actually writes/signs the checks.  Call them, directly and by name, if the payment is very late.  Let them know to whom you gave your invoice, and on what date.  They can be a great help in tracking down "lost" invoices.

If repeated efforts fail, after your invoice is significantly overdue, you might consider the small claims court, but take into account the billable hours you'll lose in court.   Also think of your reputation.  Business should be done in an office; NOT a court room.  Harvey McKay gives some useful advice on collecting past due bills in his book "Beware the Naked Man Who Offers you his Shirt."

7.2 [US] What items involve sales-tax?

Sales tax normally applies to items bought/sold within the same state, but some states also have a "use-tax" which applies to items from outside the state.   Issues regarding sales tax vary from state to state.  You should probably check with an accountant or an attorney knowledgeable about the laws where you consult and where your client resides.  However, usually consulting services are not considered taxable, but any tangible items sold or provided (hardware, shrink-wrap software, supplies) is.

Some states are involved in efforts to make computer consulting taxable.  It's usually in your interest to see what legal activity is going on in your state regarding this matter.

7.3 Who is responsible for my retirement?

As an employee, you may have plans provided by your employer.  As a independent, you are responsible for your own retirement.

7.3.1 [US] What profit sharing options do I have?

[Gem of wisdom needed here]

7.3.2 [US] What retirement plan options do I have (Keogh, IRA, 401K, pension plans)?

[Gem of wisdom needed here]

7.3.3 [US] What tax sheltering issues should I be concerned about?

[Gem of wisdom needed here]

7.4 [US] What about working with banks?

Be sure to set up a separate bank account for your business, to avoid commingling personal and business finances (separate credit cards are a good idea, too).  All the big clearing banks have business start-up packs. Don't be afraid to shop around for the best bank for you.  Look into Cash-Management accounts, interest bearing checking accounts.  It's also useful to see about easy ways to transfer funds between your business and personal accounts.  More and more banks have web-based interfaces.   These can make managing your multiple accounts a lot easier.

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8 Government issues

8.1 [US] What is the "530 Safe Harbor"?

In a nutshell, the "530 Safe Harbor" made it so that the default presumption for computer consultants was that they were independent contractors, unless proved otherwise.

With the increased enforcement of the employment tax laws beginning in the late 1960s, controversies developed between the IRS and businesses as to whether the
businesses were properly classifying certain workers as independent contractors.  As a result, Congress included section 530 in the 1978 tax bill, which created a
safe harbor by which employers could treat a worker as an independent contractor for employment tax purposes regardless of the true employment status of the
worker.  To be eligible for the section 530 safe harbor, an employer simply had to have a "reasonable basis" such as a prior audit by the IRS, a private letter ruling
from the IRS, or have relied on a long-standing recognized industry practice.   Although its was intended to be a temporary solution, section 530 was permanently
extended by Congress in 1982.

Furthermore, section 530 has prohibited the IRS from issuing regulations and guidance to employers to bring about the proper classification of workers.  The inability
of the IRS to issue rulings on employment status has prevented the IRS from clarifying the 20 point test.

As a result of the lack of clear direction, many businesses have misclassified their workers as independent contractors.  Such misclassifications have resulted in
workers being denied essential benefits such as health coverage, a retirement plan, or the employer's share of FICA taxes.  Workers who are actual employees and
who work at the direction of and under the supervision of a superior are entitled to these benefits as part of their employment.

8.2 [US] What is "Section 1706"?

In a nutshell, "Section 1706"  made it so that the default presumption for computer consultants was that they were employees, unless proved otherwise.

For businesses known as "technical services firms" who provide technical services to their customers (including computer consultants), Section 1706 removed so-called "Section 530 employment tax safe havens" that otherwise apply to all other types of businesses using independent contractors. As a result, if a technical services firm hires a high-tech worker to perform services for that firm's customers as an independent contractor, then the firm must prove to the IRS that this worker is an independent contractor under the centuries-old "common law" employment test. Even if the firm shows a strong reason for hiring the worker as an independent contractor -- for example, the IRS approved the firm's practices in a prior audit, or the treatment conforms to industry practice or a court ruling, all of which are "safe havens" under Section 530 -- Section 1706 makes these reasons irrelevant for technical services firms.

The harm to high-tech firms and workers caused by Section 1706 is more than theoretical. Technical services firms which use independent contractors -- even if they act in good faith -- can be severely penalized by the IRS and forced to pay "unpaid" employment taxes although the contractors have already paid these same taxes in full!   In fact, some IRS auditors use Section 1706 to claim "incorporated" high-tech independent contractors are not legitimate. Left with only the common law employment test to prove a worker's status to the IRS, many high-tech firms will not hire any independent contractors. They do not want to "attract" an almost-certain IRS audit because the time and expenses to fight the IRS means that even "winning" the audit is really a "losing" situation.

8.3 [US] What is UCITA?

UCITA is a proposed law that will govern all contracts for the development, sale, licensing, support and maintenance of computer software and for many other
contracts involving information. It also extends easily (vendor's choice) to sales of computers and computer peripherals and probably extends to many types of
embedded software, such as the fuel injectors in your car.

UCITA was initially proposed as an amendment to the Uniform Commercial Code, which is co-authored by NCCUSL (the National Conference of Commissioners
on Uniform State Laws) and the ALI (American Law Institute). That project (UCC Article 2B) ended when ALI walked out, after repeatedly calling for fundamental
revisions over a three year period (objecting primarily that UCITA's approach takes away key customer rights, limits competition, and conflicts with federal policies
on innovation and fair use of copyrighted materials.) NCCUSL renamed the bill, adopted it in July 1999, primarily with the support of software and information
publishers. UCITA recently passed in Virginia and Maryland. It will be under consideration in many additional state legislatures this year.

See also the ICCA position paper on UCITA at  http://www.icca.org/GovRel-PR/WebPR-UCITA.pdf.

8.4 [US] What is H1-B?

H1-B visas are reserved for skilled, educated foreigners hired to perform jobs that cannot be filled with Americans.  There is a great deal of controversy of the number H1-B's being granted.  It is also the number one source of flame-wars on alt.computer.consultants :-).

An employer, not an employee, applies for the H1-B visa. That means you cannot simply apply for an H-1B, receive authorization to work in the US, and start approaching employers. Instead, you must find a position and then allow your employer to apply for the H-1B visa.  Until recently, an individual in the US on an H-1B had to wait for government approval before switching from one employer to another.  The new law includes provisions to increase the "portability" of H-1Bs.  Now, an individual is able to start working for a new employer before the government approves the change in status from one employer to another.  The H-1B visa allows individuals to stay in the US for a maximum of six years. If an individual wants to stay in the US longer than that, he or she must apply for permanent residency.

See also the ICCA position paper about H1-B at http://www.icca.org/GovRel-PR/WebPR-H1BVisaLetter.pdf and offshore development at  http://www.icca.org/GovRel-PR/WebPR-Offshore.pdf.

8.5 [US] What about registration and certification?

[Gem of wisdom needed here]

8.6 [US] Are computer contractors licensed by the state?

[Gem of wisdom needed here]

See also the ICCA position paper on state licensure at http://www.icca.org/GovRel-PR/WebPR-Licensure.pdf

Back to Table of Contents


9 Insurance issues

9.1 Should I have liability insurance (public and client)?

[Gem of wisdom needed here]

9.1.1 What is Worker's Comp and do I need it?

Workers' Compensation laws are designed to ensure that employees who are injured or disabled on the job are provided with fixed monetary awards, eliminating the need for litigation. These laws also provide benefits for dependents of those workers who are killed because of work-related accidents or illnesses. Some laws also protect employers and fellow workers by limiting the amount an injured employee can recover from an employer and by eliminating the liability of co-workers in most accidents. State Workers Compensation statutes establish this framework for most employment. Federal statutes are limited to federal employees or those workers employed in some significant aspect of interstate commerce.

Your client may want you to carry Worker's Compensation Insurance as a protection if you are injured on their premises.  Ironically, under many state laws, if you are the owner of your business, you can't make a claim against the insurance, and if you have no employees, neither can anyone else.

9.1.2 What is Errors and Omissions insurance?

Errors and Omissions insurance provides protection against professional liability by service contractors and may be required by clients in their requests for proposals. In this way, companies who hire outside consultants are protecting themselves against any claims from their clients or customers brought by errors and omissions of the contracted service provider.Such professional liability insurance benefits a business even if claims of liability never occur.

There are as many compelling reasons for professional liability insurance as there are potential mistakes made:

You'll need to see if Errors and Omissions insurance makes sense for the type of work you do.  Another approach may be to explicitly limit your liability to the client in your contract itself.

9.1.3 Do I need office insurance (fire, theft, &c)?

Yes, to cover the contents of your office against theft, fire and other risks. If you work from home, it is unlikely that your home contents policy will cover anything used for your business. Premiums for this kind of risk have soared recently, and most companies will not make any allowance for the fact that you sleep in your office! Try companies that   specialize in this kind of risk.  Note that policies for homeworkers may not apply if you do any part of your work outside the home.

9.2 What about Health insurance?

Check what you may have lost by leaving your employer!  As an independent you have to provide this yourself.  However, some or all of the premiums may be tax deductible or an business expense.  Check with your accountant or insurance provider.

9.3 What about Long Term Disability insurance?

Long Term Disability (or Permanent Health Insurances) covers loss of income if you are unable to work through illness or injury. The amount payable depends on what you were previously earning. Consult a broker.

9.4 Do I need "Key Man" insurance?

The most valuable asset a company has is its directors and employees. Whilst other assets such as property, plant and machinery are usually insured against loss, rarely is the company protected against the temporary disability or death of a key employee.

Key man cover is often misleading with only Chief Executives and Senior Directors being considered. Businesses need to look to provide cover for other skilled people – those with specialist technical know-how. If an employee would be difficult to replace or sudden departure or illness would cause significant trading or development difficulties, key man insurances should be in place for that person.

The purpose of this insurance is simply to ensure repayment of a loan, liquidation of an overdraft, or help maintain company profits if a key man dies or is incapacitated. Cover can be arranged to provide a lump sum benefit in the event of a key person’s death or critical illness or income continuance to the company in the event of long-term sickness. The key message is that businesses are very much at the mercy of their specialist employees -sales directors, credit controllers, designers, computer experts, and the like. It is often forgotten how much money and time has been invested in these people.

This is not usually something a consultant gets.   However, some clients may obtain it to insure themselves against something happening to you.  (Nice to wanted that much!)

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10 Telecommuting

10.1 What are likely client issues?

[Gem of wisdom needed here]

10.2 What should I consider in setting up a home-office?

[Gem of wisdom needed here]

10.3 What should I consider as far as Internet access?

If you are working from your own home or office, you may be keeping in touch with your client by modem or ISDN, DSL, or cable modem.  All three technologies have pros and cons, but the one thing everyone agrees on is that the marketplace for providers is shaky.

[Gem of wisdom needed here]

Back to Table of Contents


11 Marketing

11.1 What should I charge (consulting fee guidelines)?

Find others in similar but non-competing fields, and ask them what they think you should charge.  For example, someone doing the same type of work in a different (but similar) city.  Take the following into consideration when setting your consulting fees

Employees are paid for 2000 hours per year and have no expenses.  Independents typically bill 1000 to 1500 hours per year and have insurance, phone bills, stationery, computer hardware and software, &c. So you should set your rate such that billing 1000 hours would match what you could make as a salaried employee, after expenses.

11.2 What is a broker (or bodyshop) and should I use one?

[Gem of wisdom needed here]

11.3 What is a fair commission to pay an agent or broker?

Brokers are most useful to those who don't have the time, skills or desire to market themselves.  You are paying them to find you work, in the hope that you will earn more money by being billable more often.

The lowest commissions are charged by consulting company just starting out, with low overhead and a desire to attract employees by high hourly pay.

An actual example of a low-ball commission in the US is (BillRate - 8.50) * 0.89.  Punching in a few numbers, $50 bill rate yields $37 wage.  $45 bill rate yields $32.50 wage. Example is for a temporary employee, not a subcontractor.

Some companies offer to act as a 'pass through' for $4.00-$10.00 an hour.  Typically, they don't find you work at that price.  Instead, they provide the company or corporate "shell" required by some clients.

A brokerage business has expenses for administration, employer costs imposed by the government, and commissions to sales people.  There are typically two commissions paid.  One for finding a qualified person, and the other for finding a client that has the need and the budget to hire a contractor.

Another service you might encounter is called "payrolling".  You find the client, or the client finds you, then hires the payrolling agent to be the legal buffer.  For 18-25% of gross pay, They will handle billing, tax withholding, insurance, and provide biweekly paychecks.  Since they pay all costs out of this margin, they receive a net service commission of 7-14%, with no recruiting or sales costs.

The best advice is to focus on what you get, not on what your agent or employer gets.  It is not quick or easy to build a company capable of high billing rates.  Some companies have developed strong teams of sales and technical people, and a proven track record.  Clients are willing to pay more for this, but you, as the independent, or employee of the firm, won't get the same proportion of the increased rate.  It is common in the Midwest for people to get between $30 and $60 per hour, and billing rates from $45 to $120/hr.  The people getting $60 out of 120 are doing much better than the people making $35 out of $45.

Most people who market themselves will tell you that they spend 25% or more of their time at it, and none of it is billable.  If you want an agent to do this work for you, you will find that you have to pay them about the same amount, or a little less.

11.4 What are good ways for contacting new clients?

Most consulting jobs are obtained by word-of-mouth referrals from people who know you.  This is especially true once you have become established; the majority of your clients will come from referrals as well as from repeat business.  Initially, however, you need to take active steps to gain these referrals.  Therefore, you should take every opportunity to let people that you meet know what you do and how you can be contacted.

Network (with people, not machines) by attending meetings of (or doing volunteer work for) professional organizations and talk to strangers about what you do. Know the type of client you want, and go where they are - whether it be national  meetings or local computer stores.  Have a 10 second description prepared, as well as a longer explanation for those who express some interest.  Hand out business cards to those who seem interested.  Even if they can't hire you, they may pass it along to someone who can.  Get their card and call them later to follow up, using your notes on when and where you met them and what was discussed.  Figure out a way to have them remember you.

Go to the same trade shows every year.  This way, you see changes in the industry and let people there know that you are in business for the long haul.

Read newsgroups and electronic mailing lists related to your field, follow and add substantive value to discussions.  This will get your name known, and keep you current with your field.  Blatant advertising on the net is usually counterproductive.

Join user groups in your area, and take an active part in any discussions that you have something to contribute to. Volunteer to give presentations in your particular area of expertise.  If you can afford to have some produced, hand out capability brochures (see below) to audience members after your presentation, along with a business card.

Put together a capability brochure.  This  is a tri-fold pamphlet describing what you do and the advantages it offers to potential clients.

One way to get some networking under your belt and possibly obtain new clients is to take your friends, colleagues, or past co-workers out to lunch one by one.  After chatting for a while, mention what you do.  Offer your business card and ask the person to refer to you anyone they know that might need your services.

Watch the classified advertisements in your local newspaper, and respond to any postings by local 'job shops', or technical staffing agencies.  They often keep a record of professionals in their area on file; be sure to contact them every so often to make sure they keep your file current. Being on file with such agencies can often lead to high-paying referrals.

Contact the activity directory of any user groups you belong to and offer to give a short presentation on your particular area of expertise.  Set up a table in the back of the room with your capability brochures and business cards prominently displayed.

See also section 1.6 about other consulting activities which can also help you market yourself.

11.5 What are effective uses of Direct Mail?

As with any marketing campaign, you must first have a firm idea of who your prospects are.  This means that you must know:

Using a good working knowledge of who your target market is and what their problems are, present your services as the solution to those problems, making it clear how you can solve them in the most cost-effective way possible.  After making that presentation, always, always, always follow up with a call to action.  Instruct the prospect on what it is they are to do next.  If you leave out the call to action, the ad copy is nothing more than informational and will fail to generate any leads or sales.

In your ad copy, avoid the use of such phrases as "To whom it may concern".  Find out who the mailing should be sent to ahead of time, either by looking it up at the library or calling directly and asking "who is in charge".  Make sure that each letter is hand signed by yourself in blue ink, and whenever possible, hand-write each name on the envelope and use a real stamp for postage.  Labels and metered postage say "junk mail" and often are discarded outright.

Finally, depending on your particular direct-mail ad copy, follow with a phone call a week or two later to the same person the mailing was addressed to.  Tell the person you are following up on the mailing, and then offer to answer any questions they might have or even to arrange a lunch meeting to discuss the topic further.  This follow-up is very important to the success of the mailing.

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12 Resources

12.1 [US] What useful organizations exist for computer consultants?

In addition to the professional, technical, or trade organizations listed elsewhere below.  There are a number of organizations which can be of use:

12.1.1 What is the ICCA?

The Independent Computer Consultants Association (ICCA) is a trade organization whose focus is to assist computer consultants in developing their business, and provide a large number of benefits and discounts for services consultants can use.. From the ICCA website at www.icca.org:

ICCA is a national not-for-profit association based in St. Louis that provides professional development opportunities and business support programs for independent computer consultants. ICCA has chapters in many major metropolitan areas representing nearly 1500 consulting firms nationwide. It is one of 12 major computer-related associations represented on the board of directors of the Institute of Certified Computer Professionals.

ICCA was founded in St. Louis in 1976. The core group quickly expanded to include members across the United States. ICCA was formed with three basic purposes: To promote professionalism within the industry; To make the business community aware of the products and services available from independent consultants; To provide group type benefits to members.

Members of the Independent Computer Consultants Association (ICCA) are computer and software experts who have practical experience with the industry's rapidly changing technology. They use, recommend and install the latest products, and help corporations and individuals utilize the capabilities of the technology they own.

12.1.2 What is the Programmer's Guild?

The Programmer's Guild is a member run organization of computer programmers trying to enhance the image professionalism for their trade.  From their website at http://www.programmersguild.org/american.htm:

Now that the software industry is maturing we are proposing the creation of Guild or professional society specifically for programmers. At this time programmers are not organized and this is increasingly putting us at risk.

12.1.3 What is the IEEE Computer Society?

The IEEE Computer Society is one of the largest worldwide organization of computer professionals.  From their website at http://www.computer.org:

The Computer Society's vision is to be the leading provider of technical information and services to the world's computing professionals.

The Society is dedicated to advancing the theory, practice, and application of computer and information processing technology. Through its conferences, applications-related and research-oriented journals, local and student chapters, technical committees, and standards working groups, the Society promotes an active exchange of information, ideas, and technological innovation among its members. In addition, the Society maintains close ties with the US Computing Sciences Accreditation Board and Accreditation Board for Engineering and Technology, monitoring and evaluating curriculum accreditation guidelines.

12.1.4 What is the ACM?

The Association of Computing Machinery, founded in 1947, is the world's first educational and scientific computing society.  They have over 80,000 members, worldwide and a strong academic orientation.  See their website at http://www.acm.org:

12.1.5 What are SIGs?

Many computer-oriented professional organizations have Special Interest Groups (SIGs) for consultants. They can be a valuable resource for advice from peers and act as lead generators.  Check out http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Computers/Industry_Information/Professional_Organizations/,   http://dir.yahoo.com/Science/Computer_Science/Organizations/Professional/, and   http://dir.yahoo.com/Computers_and_Internet/Communications_and_Networking/Organizations/Professional/   for lists.

12.2 What about vendor programs/products for consultants?

[Gem of wisdom needed here]

12.3 [UK] What general business organizations are helpful for consultants?

12.4 What's on the net that I should look at?

[US]

[Gem of wisdom needed here]

[Most of the information here is from the old uk consultants list.  Please help add to this list.  Also, let me know if any of the links go bad]

[UK]

12.5 Read any good books lately?

For your consideration:

[US]

Accounting for Dummies, John A. Tracy
IDG Books, 1997, ISBN 0764550144

The Consultant's Quick Start Guide: An Action Plan for Your First Year in Business, Elaine Biech
John Wiley & Sons; 2001, ISBN 0787956678

Cutting Edge Consultants, Lawrence W. Tuller
Prentice Hall, 1992. ISBN 013194598X

Getting Started in Computer Consulting, Peter Meyer
John Wiley & Sons, 2000, ISBN 0471348139

How to Make it Big as a Consultant, William Cohen, Second Edition
American Management Association, 1985, ISBN 0814478603.

How to Succeed as an Independent Consultant, Herman Holtz
John Wiley, Third Edition, 1993, ISBN 047157581X

Inside the Technical Consulting Business, Harvey Kaye, Second Edition
Wiley-Interscience, 1994, ISBN 0471597198

Janet Ruhl's Answers for Computer Contractors
Technion Books, 1999, ISBN 0964711621

Total Business Planning, E. James Burton and W. Blain McBride
John Wiley & Sons, 1991, ISBN 0471823791

Wage Slave No More: The Independent Contractor's Legal Guide
Stephen Fishman, Nolo Press, 1997, ISBN 0873373596

[UK]

Successful Marketing for the Smaller Business: Dave Patten
Kogan Page 3rd ed. 1995 ISBN 0 7494 1527 4

Start and Run a Profitable Consulting Business: Douglas A Grey
Kogan Page 1985/1989 ISBN 1 85091 926 7

How to Sell a Service: Malcolm HB McDonald with John W Leppard
Heinemann 1986 ISBN 0 434 91231 8

Professional Issues in Software Engineering:, Frank Bott, Allison
Coleman, Jack Eaton, Diane Rowland
Pitman 1991 ISBN 0 273 03258 5 (was a course text - good)

Managing Your Company's Finances: RL Hargreaves, RH Smith
Heinemann 1981 ISBN 434 90686 7

Going Freelance - a guide to self-employment with minimum capital:
Godfrey Golzen
Kogan Page Limited 1989 ISBN 1-85091-808-2
Lots of information, wide coverage (a lot on management consultancy), a little heavy-going and not quite as readable as I would like, nevertheless worth perseverance.

High Income Consulting: Tom Lambert
Nicholas Brealey 1993, ISBN 1-85788-0358 Pbk
Full of sensible practical suggestions and easy to read.

Start and run a profitable consulting business: Douglas A. Gray
Kogan Page, 1985, 1989 ISBN 1-85091-926-7
Aimed particularly at management consultancy. Covers determining marketing opportunities, getting clients, writing a successful proposal, handling an assignment, setting fees and invoicing clients, keeping records, legally minimizing the tax bill, avoiding professional liability and preventing losses, maintaining healthy client relations,  running the office smoothly. Very useful.

How to sell a service: Malcolm McDonald with John Leppard
Heinemann, 1986 ISBN 0-434-91229-8
Mainly aimed at sales/marketing people, but useful tips for the rest of  us. Covers the problems associated with selling a service, reaching the customers, opening the sales interview, benefit selling, dealing with objections, techniques for closing the sale.

Service management: Richard Normann
Wiley, 1984 ISBN 0-471-90403-1
Subtitle is Strategy and Leadership in Service Businesses. Covers services in society and in the world of management, service management systems, the service concept, the personnel idea, getting people to grow, the client as market and co-producer, physical setting and technical tools, image, creating reproducing and refining business ideas, diversification and internationalization, quality productivity and strategy, diagnosis: positive circles and vicious circles, culture and philosophy as a management tool, change and leadership.

The businessman's complete checklist: WC Shaw and GJ Day
Business Books (Hutchinson), 1978 ISBN 0-09-162670-6
Just what it says: a book of lists. Nobody would want all of them, and lots of stuff isn't there, but handy all the same. Covers corporate planning, management, marketing and selling, manufacture, distribution and storage, personnel, finance and accounting.

Managing your company's finances: RL Hargreaves and RH Smith
Heinemann, 1981 ISBN 434-90686-7
Aimed at small/medium sized businesses without professional financial support. Covers the need for financial management, basic accounting, profitability, cash management, credit control (sales), credit control (purchases), budgetary control, capital expenditure budget, sales and production forecasts, cost budgets, budgeted profit and loss, pricing, justifying the raising of finance, types of finance, providers of finance. Good for impressing the bank manager and putting the look-good stuff in a business plan.

12.6 Read any good magazines lately? (controlled circulation)

[US]

[Gem of wisdom needed here]

[UK] The following magazines may be available free of charge to consultants who meet the publishers' circulation criteria, but the criteria change from time to time. Their varied thickness make them very handy for fine adjustment of table legs.

Business and Technology 0181 563 1000, Fax: 0181 563 1010

Computer Consultant 01442 230230, Fax: 01442 244346

Computer Contractor 0171 316 9700

Computer Personnel 01442 230230

Computing 0171 316 9000, Fax: 0171 437 3516

Consultants' Conspectus 01923 285323

Freelance Informer 01753 567567

Infomatics 0171 316 9000

IT Consultant 0171 720 0513, Fax: 0171 498 0765, Email: hillgate@atlas.co.uk 

Management Consultancy 0171 316 9000, 9277 or 9032 email: 100445.434@compuserve.com.

PCLAN 0171 316 9000

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