Most of the banking job offers I have been getting in NYC are for Temp to Perm (a # of Banks aren't allowed to hire perm employees).

One bank gave me two choices:
Work for an agency where I would be an hourly there
Set up my own corporation (about $5/hr more I would get but I guess more paperwork)

I'm leaning toward setting up my own corporation.

1. Have others done this?
2. What do I need to worry about (SS taxes, health insurance, 401k)?

Setting up your own corp is a lot of work and for it to be done properly a lawyer is highly recommended. Also remember that some states, like CA have mandatory tax even if your corp does not make any money. In CA its $800, so let's say you are hired perm, you would have to dissolve the corp, which also costs money.

It is not only $5 to incorporate, it is hundreds possibly thousands of dollars.

You should only consider this if your end wage would be higher with the corp versus that of an hourly or you get other benefits.
When I was temping, I was consistently paid more than my worth because the agency wanted the highest wage so they could take their cut.

are they specifically saying you need to be a corporation? Or can you be any type of business entity?

I'm guessing when they say Corp, they'd be happy paying you as an LLC. The problem with a corporation (under the business law of my state) is that you need at least two officers and you must hold annual meetings, etc. An LLC is much more flexible.

This varies from state to state, but around here it's $100/yr to set up/maintain an LLC, and if you live in-state there's no reason to hire an agent for process. And for tax purposes, it's (basically) the same as if you were an independent contractor. (a single member LLC is a disregarded entity for federal income tax purposes)

The main difference between getting paid personally or through a corp is if your hourly wage at the agency is a W2 job or a 1099 job. As a W2 employee, the employer pays half your payroll tax (7.5%), and you pay the remaining 7.5%. If they're going to 1099 you, then you have to pay the full 15% yourself. As an LLC, you have to pay the 15% on your business income.

So if the agency is willing to hire you as a W2, I'd personally take a paycut of up to 7% over setting up your own business (maybe even a touch more, considering the hassle of setting up and maintaining a corporation or LLC, an operating account, officers, meetings, and filing the quarterly 1040-ES).

oopsz - not all states allow you to setup a single member LLC, which is what the OP would need in this case.

Will find out if a sole prop will fly.

NYC still has a 4% tax against that unforunately.

StevenColorado said:So set up a sole prop. Unless you have liability issues, it's your best option. It's cheap and easy.Doubt that would fly, since it doesnt sound like he'd be able to function as an independant contractor. There still needs to be a separate entity for him to be employed by, be it a corporation or a temp agency.

$5/hour more is a meaningless figure, whether incorporating is a good idea or not would depend on what percentage of your compensation that $5 represents. Frankly I'd go with the agency - less paperwork, and if the bank no longer needs your services the agency will have other jobs/clients available for you to transfer to.

LH2004 said:tante said:oopsz - not all states allow you to setup a single member LLC, which is what the OP would need in this case.Yes, they do.

thanks for the correction guys. I didn't know that this is now allowed in all 50 states as of 2003. I actually learned something on the Internet today.

welookgoodcom said:
Work for an agency where I would be an hourly there
Set up my own corporation (about $5/hr more I would get but I guess more paperwork)

What % of overall billing rate is an additional $5/hr? And I am surprised that by going through an agency, their cut will only be $5/hr from your rate - it just seems way too little in NYC.

My billing rate at one time was $115/hr, of which I was getting $95/hr because the vendor management at the client forced me to go through a particular agency who would not budge from their cut. I was paying $20/hr or roughly $40k/year to the agency, and I am sure the agency was giving a fat cutback to the vendor management guy.

welookgoodcom said:Looking at NY/NYC tax laws they aren't very friend to LLCs. From what I understand they still double-tax where as other state would look as a 1 person corp as a pass through.

In New York City, S-corporations are subject to the full corporate income tax at a 8.85% rate.

An LLC isn't an S-corporation. An S-corp is a regular corporation that has taken the subchapter S election under the internal revenue code. If no election is taken, a corporation defaults to being taxed under Subchapter C (A so called "C-Corp").

An LLC can elect to be taxed as an S-Corp or as a partnership. (This is a federal election, I have no idea what significance it would have at the state level.) If NY respects an LLC elected to be taxed as a partnership (a pure flow-through) then there should be no tax at the state level.

(Though I'm surprised- if NY is willing to charge corporate tax on an S-corp, with all the Sub-S restrictions placed on one, then they'll probably tax partnerships and LLCs, too. No wonder most NY companies incorporate in Delaware or Jersey- then only NY source income is subject to NY tax.)