Contract/freelance programmers

[FP]

I am going to start doing contract programming gigs on the side and have no idea where to start... Is there a good book that details all of the ins and outs of being a contractor?

I want to know things like...

1. Should I start an actual company and work through that?
2. How do I shield my personal assets from litigation if something goes wrong?
3. If I hire a friend to help how do I pay them?
4. What are the tax implications?
5. What sort of contracts should I have the employer sign?
6. How much to charge or go about finding that info?

Thanks!

 

[randay]

1. no
2. use a fake name, ie: lester "the molester" cockinshtuff
3. cash or sex
4. dont ask dont tell
5. one that says they will pay you
6. "i dunno, how much you got?"

welcome

 

[NuroMancer]

1. probably
2. form a company
3. sexual favors work as well as anything else
4. not familiar with American tax laws
5. get a contract from a lawyer; should be cheap as they should be able to just charge you for a template
6. depends on work, expertise, etc.

 

[Crono]

What programming language(s)? How skilled/educated are you? Have you done freelancing through the web (i.e. freelance hiring sites, project job postings, etc)?
I'm not a programmer, but here's my (potentially worthless) opinion:

1. Not unless you have enough experience freelancing or working for a company first (develop a portfolio)
2. Hire a lawyer to draft up a legal agreement that you would have people sign
3. Write him/her a check
4. If it's not a business, same as self employed person. I don't know details, but you would have to report all earnings for income tax purposes.
5. Consult a lawyer
6. Best to work with someone or a company for a while, and you can pretty much figure out what they charge.

 

[hanoverphist]

1. Should I start an actual company and work through that?
if you want #2, yes

2. How do I shield my personal assets from litigation if something goes wrong?
LLC. look it up, dont forget.

3. If I hire a friend to help how do I pay them?
have them sign a temp contract labor form that you get from the corp lawyer that helps you set up the LLC

4. What are the tax implications?
too much to list here, lots of stuff online, especially your local govt contractors info pages.


5. What sort of contracts should I have the employer sign?
whatever you do, make sure you have everything in writing, including any copyrights you wish to retain for code you write. technically, if you design a program under contract for someone else, they own all rights to it unless specified differently. also talk to a corp lawyer about this form.

6. How much to charge or go about finding that info?
ive charged 95/hr for years, 45/hr for hardware support. im about 40% under the average i think, last time i checked. since i do it on the side for a hobby, i dont really have to worry about the tax end of it... at least until i make a certain amount per year off of it.

if youre serious about it, call your state corp commission and start asking questions, using links on their sites and what not. none of this stuff does itself, youll have to take lots of initiative to get it all done.

 

[yllus]

If you're just starting out, stick with a sole proprietorship instead of incorporating. AFAIK, the purpose behind incorporating for you, which would be to shield your personal assets from legal claims, won't work. Tax matters also become significantly more complicated. You can always incorporate later.

Pay by cheque.

I'd dredge up the contract we used to have clients sign but I'm at the office right now and that stuff is at home somewhere. Be thorough, though, and definitely address two key areas: Revisions and the status of the intellectual property being created.

In regards to revisions, in your contract you should list the number of minor code revisions you will do for free as a part of the original contract (price this into your quote, by the way, because they will get used), the cost of major revisions, and the cost of minor revisions after their first three. With IP, state who will be the ultimate owner of the IP (who retains rights to reuse and/or sell it).

Please, please don't charge anything less than $30/hr at the very minimum. $60/hr to $100/hr is more the average, though. I mention the $30/hr figure because underbidding is killing the industry.

Developers are variously good or bad at estimating a number for their original quote, but I tend to find the best approach is to list on 'paper' every single function (and/or page, I mostly do Web work) that will be needed in the project. In the process of this writeup you will no doubt discover that more functions/pages are needed than you originally figured, thus requiring more time and more cost to the client. When finished, take your number of hours and multiply them by 1.5. That should put you in the proper range.

 

[nakedfrog]

I hope you like meetings.

 

[Saint Nick]

You could potentially make a lot of money this way. However, I think that you might have a hard time finding work right now. A lot of businesses have their own programmers because it is cheaper?

Amiwrong?

 

[nakedfrog]

Originally posted by: NightDarker
You could potentially make a lot of money this way. However, I think that you might have a hard time finding work right now. A lot of businesses have their own programmers because it is cheaper?

Amiwrong?

Yes and no. It depends on your network. Having their own programmers is only cheaper if they need enough coding done to keep them busy constantly. If they just need a few changes made now and then, or an app made, it's cheaper to hire a consultant.

 

[FP]

Thanks for the info.

I already have a 9-5 job. I was approached by a couple of acquaintances about doing 10-15 hours a week of work for them. I have done consulting before through a previous job and know the ballpark of my rates.

I just didn't/don't know exactly what the next steps are. I am going to meet with the next week and didn't what to expect.

 

[Descartes]

IMO, you're either making this far too complicated or not enough. You need to decide if you want to be someone that works a few hours on the side or if you're wanting to be serious. You don't need all these contractor/subcontractor/master agreements, etc. and you don't even need an S-Corp/LLC (assuming not a C-corp). Granted, if it's asset protection that you're concerned about, that's another thing entirely.

Getting started seriously can take a lot of time and effort. I'll give you an idea of what we do, at a minimum, for our company:

1) Master agreement that the client signs.
2) Statement of Works for individual efforts.
3) A plethora of other contracts/documents depending on the needs. This could be architecture design docs to functional requirement docs.
4) If using subcontractors, there are subcontractor agreements with potentially service level agreements that accompany those.

How much to charge depends on the market obviously. You can't compare your rate to a corporate with a team of people, because they have costs and value associated with their services that you don't. Your best bet is to do a little social engineering and call some local recruiters, look in CraigsList/Monster/etc. and get a feel for what rates are out there.

To get you started though, the easiest approach is to just generate a Statement of Work for every engagement you have and have the customer sign it. These are binding agreements. There are plenty of resources out there to help you with an SOW, but for the most part it's part of the package that companies offer. You won't get much help from people in this regard; it would be like calling a restaurant and asking for their recipes.

Beyond that, if you hire a friend you treat him/her like a subcontractor. You pay them and issue a 1099 at the end of the year for the costs associated with it.

That's all that immediately comes to mind. My honest advice is to just try and not make it so complicated unless you have ambition to grow beyond a few extra hours, and if you do there's a lot more to consider.

 

[Descartes]

Originally posted by: NightDarker
You could potentially make a lot of money this way. However, I think that you might have a hard time finding work right now. A lot of businesses have their own programmers because it is cheaper?

Amiwrong?

There's no potentially about it. The entire market exists for a reason. A subcontractor is one thing, but companies (including ours) are supported entirely on the principle of supplementing existing resources.

A company in healthcare isn't going to hire the talent necessary to realize a technology vision that might take 12-24 months to implement. It makes no sense to do so, and for this reason solutions firms exist to do this.

To give you an analogy, you don't go to your general practitioner for surgery; instead, you go to a hospital (generally speaking here, let's not get too serious about it) where they are better equipped with the surgeons and specialized expertise. Likewise, most companies hire general practitioners with the resources and capability of supporting your average cold, but give them a cancer and you need a team of oncologists to help you out.

 

[degibson]

Originally posted by: FP
1. Should I start an actual company and work through that?

If don't, you're automatically a sole proprietor in most states in the US. If you do, you're not legally distinct from a sole proprietor unless you incorporate.

2. How do I shield my personal assets from litigation if something goes wrong?

Either liability insurance, incorporation, or both.

3. If I hire a friend to help how do I pay them?

Don't do it. If you are an employer, you'll have to pay social security, etc., in the US. If you need to hire someone, make them a contractor.

4. What are the tax implications?

Money from contract employment is a real PITA -- it is taxable, and there's no withholding. AKA you're going to owe taxes on everything you collect. Anyone who pays you more than a fixed amount ( ~$1000 IIRC, but I'm not 100% sure about the amount) has to send you a 1099.

5. What sort of contracts should I have the employer sign?

It depends. I usually provide a non-functional demo before any contract work (aka under verbal contract only). If that works out, I flesh something out on a case-by-case basis. If you're small enough, you don't need anything too elaborate.

6. How much to charge or go about finding that info?

Take your desired yearly salary, divide it by the time it'll take you to do the work (size it up if you think you can get away with it), and do it. Bear in mind your estimate is pretax.

 

[Markbnj]

Many corporations will not work with a sole proprietor, for liability reasons. If you set up an S-corp or LLC to work from, you may also find that they want you to show proof of general liability and workman's comp. insurance. You can get packages that cover this from small business specialists for around $1500/year.

It's not as easy to get started contracting as it used to be, and at least here in the northeast the $60 - $100/hour that someone mentioned above is beginning to look a little aspirational. Corporations know the economy sucks, and I am starting to see a lot of $35-55/hour gigs.

Best way to get started is to work through an agency that has existing contracts/needs.

 

[FP]

$60-$100/hour is high? Wow. A previous contracting company I worked for billed individual programmers out at $150-$200/hour. I guess the economy has taken a toll.

Well, I guess I will keep it simple for now. As I said, they were only looking for 10-15 hours per week which is really all I can do while holding a full-time job.

 

[EagleKeeper]

Originally posted by: Markbnj
Many corporations will not work with a sole proprietor, for liability reasons. If you set up an S-corp or LLC to work from, you may also find that they want you to show proof of general liability and workman's comp. insurance. You can get packages that cover this from small business specialists for around $1500/year.

It's not as easy to get started contracting as it used to be, and at least here in the northeast the $60 - $100/hour that someone mentioned above is beginning to look a little aspirational. Corporations know the economy sucks, and I am starting to see a lot of $35-55/hour gigs.

Best way to get started is to work through an agency that has existing contracts/needs.

I have a business liability & insurance through my State Farm agent for $50/month. If you are on your own, they do not need workmans comp - that is for when you have employees under you.

Originally posted by: FP
$60-$100/hour is high? Wow. A previous contracting company I worked for billed individual programmers out at $150-$200/hour. I guess the economy has taken a toll.

Well, I guess I will keep it simple for now. As I said, they were only looking for 10-15 hours per week which is really all I can do while holding a full-time job.

What a contracting company bills the client for and what the contractor gets paid is a vaste void. The contracting agency covers it's overhead by anywhere from 20-60% (depending on salary). Figure at least $10-$20/hr overhead. for the agency. They have to pay for their offices, staff, recruiters, sales people, etc.

Get all agreements in writing - I have a penalty clause on my invoices of 5% if not paid on time.

Some companys will want you to wait 30 days on ivniove payments, others will pay on a week by week. It is up to your negotiating skills.

Make sure that the agreement has deadlines and deliverables specificed if developing a new project.

 

[Markbnj]

I have a business liability & insurance through my State Farm agent for $50/month. If you are on your own, they do not need workmans comp - that is for when you have employees under you.

The two agencies that I heard this from might be anomalies. This was within the last couple of months. Both are large groups with on- and off-shore ops, and offered me two options: W2, or corp-2-corp if I could show proof of GL _and_ workman's comp. I protested with the same argument you used, but they essentially shrugged.

 

[EagleKeeper]

Originally posted by: Markbnj

I have a business liability & insurance through my State Farm agent for $50/month. If you are on your own, they do not need workmans comp - that is for when you have employees under you.

The two agencies that I heard this from might be anomalies. This was within the last couple of months. Both are large groups with on- and off-shore ops, and offered me two options: W2, or corp-2-corp if I could show proof of GL _and_ workman's comp. I protested with the same argument you used, but they essentially shrugged.

You should be able to get a statement from the insurer stating that WC is not needed for one with no employees.

The Feds even state so in some of their docs.

Now, the agancy may not care and they could look elsewhere.
When you have a potential client invested in having you come online is when you have the best leverage on misc items w/ respect to the agency.

 

[Ken g6]

As an employee of a very small contracting company, I was never, or almost never, hired as a contractor from that company directly. Apparently, it doesn't look good for a large, publicly traded company to hire some no-name company (or person, probably) for any important task.

Instead, I was always subcontracted through some other contracting company, such as Amdocs, or Ciber. You lose some pay just for the name recognition; but if you do a good job, either the main company or the contracting company might hire you on directly.