Employer requirement: Must be a sole proprietor

Sorry for the double post, mod. I figured this was probably the right spot for this, though I also posted it over in career and job

So, I have a question. My boss wants to "hire" me, but he isn't interested in a standard W-2 employment contract. Instead, he wants me to set up my own LLC (I’d be working as a promoter) and then he’ll just sign a contract with my business. He’d pay me a gross amount, and then I’m responsible for all my own taxes, social security, and whatever else. If I end up with roughly $4,000 net, I guess I'm wondering if that actually makes sense. Between Chamber of Commerce fees, business taxes, and what the IRS told me about needing a dedicated POS system... it feels like a lot. The employer said they’d handle the bookkeeping part, too. But from what I hear, this guy is pretty stingy with mileage reimbursements for his staff, so I’m low-key skeptical about whether he’ll even pay me the full amount on time... including travel stuff and all that.

p.s. does anyone know how much banks typically charge monthly for a small business checking account?

Honestly, the bank fees for a business account should be the least of your worries.

You’ve got to factor in all those extra taxes and regulatory fees, not to mention hiring an accountant—unless, of course, you actually enjoy spending half your life staring at spreadsheets.

Just to give you a ballpark figure, expect your basic monthly overhead to sit around about $333 per month.😉

I.

Edit:

Keep one thing in mind: about 80% of those people drowning in lawsuits or facing bankruptcy are small business owners who got a little too cocky. They tried to cut corners by skipping the accounting help, thinking they could just "catch up" later. Don't let yourself become part of those grim statistics. When you run a sole proprietorship in the States, your personal assets are on the line, so please, be careful out there.

The employer would handle the bookkeeping through an independent accounting firm, so it wouldn't be my expense...
I guess I’d just be relying on them to pay me on time, which would all depend on whatever business contract we signed.
Yeah, but you make a good point about being personally liable for everything... hmm.

Ashley Mendoza6 said:Honestly, the bank fees for a business account should be the least of your worries.

You’ve got to factor in all those extra taxes and regulatory fees, not to mention hiring an accountant—unless, of course, you actually enjoy spending half your life staring at spreadsheets.

Just to give you a ballpark figure, expect your basic monthly overhead to sit around about $333 per month.😉

I.

Edit:

Keep one thing in mind: about 80% of those people drowning in lawsuits or facing bankruptcy are small business owners who got a little too cocky. They tried to cut corners by skipping the accounting help, thinking they could just "catch up" later. Don't let yourself become part of those grim statistics. When you run a sole proprietorship in the States, your personal assets are on the line, so please, be careful out there.

Taxes and payroll taxes hit around 2k, then you gotta scrape together another 3-4k for rent and all that other junk.

If he's planning on working with just one client, that’s a huge risk. If they miss a payment or start squeezing him on rates, he's stuck making way less than he expected.

The workspace would be inside the apartment I'm renting. I'd need a signed statement from the landlord giving me the green light... but yeah, the biggest risk is probably if they end up being my only client. If they miss a payment or anything, I'm basically screwed.
Then again, I'm currently unemployed, so I don't really have much of a choice...

Not trying to rain on your parade, but who’s actually buying books? Americans just don't buy them like that...

Did you even look at the contract you'd be signing with them? There's probably a clause in there about minimum sales volume...

An eight-day notice period? That’s just not realistic.

To make any money running your own business, they’d need to pay you $8,000 $3.25 a month. I don't see how that's any better for them than just hiring you as an employee.

It’s not really direct textbook sales; it's more like lobbying within the school districts.
The contract doesn't have any clauses tied to specific numbers... since you won't actually see results for at least a year anyway.
The business cooperation agreement can be terminated by either side with just 8 days' notice, if they're looking to bail quickly. They didn't specify the exact gross amount, but I'm guessing it's somewhere around 5,500 or 6,000.

Bradley Smith88 said:It’s not really direct textbook sales; it's more like lobbying within the school districts.
The contract doesn't have any clauses tied to specific numbers... since you won't actually see results for at least a year anyway.
The business cooperation agreement can be terminated by either side with just 8 days' notice, if they're looking to bail quickly. They didn't specify the exact gross amount, but I'm guessing it's somewhere around 5,500 or 6,000.

Some accountant can run the math for you to see if $2000 works if you stretch things out.
There are tons of overhead costs. For example, you'll drop $3,000 to $5,000 on business insurance the second you set up an LLC. Your utility bills will basically double since you'll be paying small business rates. I'm not sure if you have to account for property tax even if you own the space—check with the IRS on that. Bottom line: starting isn't cheap and the risk is high.

I think you’re overestimating the overhead here quite a bit. 😉
The basic safety gear and first aid supplies he actually needs won't run him more than $133.
If I were looking at bare-minimum technical requirements—things like electrical inspections, climate control 🙂, and standard OSHA compliance for two employees plus a director—it would cost me less than $1667.
Then you've got the various taxes and fees for a small business owner, which sit around $583, plus those chamber of commerce dues (which run me about $40/month).
It’s usually cheaper to just work for a corporation where you can pick up a minimum wage job, though the upfront costs of starting your own thing are definitely higher.
In my book, you need a monthly take-home of at least 7k-$2667 to make this kind of venture worth the headache. That's just based on the logic of "better to be working than sitting on the couch."

Good luck.

Henry Edwards33 said:I think you’re overestimating the overhead here quite a bit. 😉
The basic safety gear and first aid supplies he actually needs won't run him more than $133.
If I were looking at bare-minimum technical requirements—things like electrical inspections, climate control 🙂, and standard OSHA compliance for two employees plus a director—it would cost me less than $1667.
Then you've got the various taxes and fees for a small business owner, which sit around $583, plus those chamber of commerce dues (which run me about $40/month).
It’s usually cheaper to just work for a corporation where you can pick up a minimum wage job, though the upfront costs of starting your own thing are definitely higher.
In my book, you need a monthly take-home of at least 7k-$2667 to make this kind of venture worth the headache. That's just based on the logic of "better to be working than sitting on the couch."

Good luck.

That’s actually really helpful info, I was wondering about that. So, basically, you need at least $2333 just to break even and not end up making minimum wage. Thanks!
Since I’d be registering this sole proprietorship at my parents' house, I hope it doesn't mess with their utilities or property taxes or anything like that??
What a headache. I have to give them an answer by tomorrow too—only a two-day window—and I won't even know what the deal is with those small business startup grants from the unemployment office until Friday... total stress.

Thanks.

Henry Edwards33 said:I think you’re overestimating the overhead here quite a bit. 😉
The basic safety gear and first aid supplies he actually needs won't run him more than $133.
If I were looking at bare-minimum technical requirements—things like electrical inspections, climate control 🙂, and standard OSHA compliance for two employees plus a director—it would cost me less than $1667.
Then you've got the various taxes and fees for a small business owner, which sit around $583, plus those chamber of commerce dues (which run me about $40/month).
It’s usually cheaper to just work for a corporation where you can pick up a minimum wage job, though the upfront costs of starting your own thing are definitely higher.
In my book, you need a monthly take-home of at least 7k-$2667 to make this kind of venture worth the headache. That's just based on the logic of "better to be working than sitting on the couch."

Good luck.

Maybe I exaggerated a little, but not by much.

Compliance could easily hit $2,800—$1167—depending on which firm he signs with, plus annual maintenance and fire extinguishers. He could easily end up paying $1333 just for himself without even accounting for staff.

Utility bills are 50% to 100% higher than at home. It all depends on whether he needs a laptop, phone, data plans, or travel expenses since he'll be out in the field.

He might also have to pay for things like office TV or subscriptions if he wants them. Just extra overhead.

The first month is always the killer. He'll need a sign, he'll have to switch to a business utility rate (for example, Exelon might charge $250—$100) and so on. All that stuff makes the first month expensive.

Bradley Smith88 said:That’s actually really helpful info, I was wondering about that. So, basically, you need at least $2333 just to break even and not end up making minimum wage. Thanks!
Since I’d be registering this sole proprietorship at my parents' house, I hope it doesn't mess with their utilities or property taxes or anything like that??
What a headache. I have to give them an answer by tomorrow too—only a two-day window—and I won't even know what the deal is with those small business startup grants from the unemployment office until Friday... total stress.

Thanks.

You either have to switch all the utilities to a commercial rate, or just that specific room if you’ve got separate lines—like a dedicated electric meter or something.

We’ve got this thread going where plenty of people have already shared their stories. Give it a scroll through first, then feel free to ask 😉anything else
.

If you want my honest opinion, here is the golden rule... stay away from sole proprietorships!
When you run a business as a sole proprietor, you are essentially putting your entire life's savings and every asset you own on the line; if you aren't an absolute expert in legal jargon and contract law, you’re just asking for someone to exploit you with a fine-print clause, leaving you completely ruined. To be perfectly blunt, the whole setup feels incredibly rigged against the little guy.
If you have already set your heart on starting something, go with an LLC instead, because then you won't have much to lose since your personal assets remain protected from the business's liabilities.
There is no requirement to be an employee of your own LLC, which allows you to keep your monthly overhead and tax burdens significantly lower.

Nancy Alvarez82 said:If you want my honest opinion, here is the golden rule... stay away from sole proprietorships!
When you run a business as a sole proprietor, you are essentially putting your entire life's savings and every asset you own on the line; if you aren't an absolute expert in legal jargon and contract law, you’re just asking for someone to exploit you with a fine-print clause, leaving you completely ruined. To be perfectly blunt, the whole setup feels incredibly rigged against the little guy.
If you have already set your heart on starting something, go with an LLC instead, because then you won't have much to lose since your personal assets remain protected from the business's liabilities.
There is no requirement to be an employee of your own LLC, which allows you to keep your monthly overhead and tax burdens significantly lower.

You basically have to find a job 😉

Bradley Smith88 said:The workspace would be inside the apartment I'm renting. I'd need a signed statement from the landlord giving me the green light... but yeah, the biggest risk is probably if they end up being my only client. If they miss a payment or anything, I'm basically screwed.
Then again, I'm currently unemployed, so I don't really have much of a choice...

Bills are jumping by 50% to 100% compared to what a regular household pays.

Nothing changed on my end—I'm still just on a standard residential plan.

Nathan Cox25 said:

Bills are jumping by 50% to 100% compared to what a regular household pays.

Nothing changed on my end—I'm still just on a standard residential plan.

LOL, things don't just fix themselves. You actually have to go down to the utility office and request the switch, otherwise you're technically breaking the rules. If they catch you, you'll be stuck paying the difference plus legal interest.

I just sent my thanks, but if they can't even offer me a steady full-time position... then I guess we're done here..

Bradley Smith88 said:I just sent my thanks, but if they can't even offer me a steady full-time position... then I guess we're done here..

Exactly.

rapidotter11 said:Exactly.

I'm right there with you!