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    5 Replies Latest reply on Jun 10, 2008 5:57 PM by m.rick

    Self Employed Consultant to Incorporation

    teamtwi Wayfarer
      A question for those consultants who moved their (1 person) company from an contractor / consultant status to incorporation of the company:

      If I incorporate, will this protect me from previous business arrangements that I had in previous years while strickly a consultant, under the company name (DBA)? My plan is to know incorporate as I have the business growing enough that I can take advantage of certain things for the incorporation.

      I just found out about this site and so far its very interesting with topics, etc.

      Thanks for the feed back.
        • Re: Self Employed Consultant to Incorporation
          dublincpa Scout
          While I am not an attorney, I am told that you will likely have liabilty for prior dealings. Existing contracts with your sole proprietorship may possibly be assigned to the corporation if permitted. If not, you may ask clients to sign a new agreement with the corp for the balance of the old contract or renew early for an incentive. You will want all the renewals with the new corp. You may want to see about how your insurance coverage will handle old claims. If the corp is treated as a new separately insured, you may want to ask about tails coverage to deal with any outstanding risk from your sole prop days.

          Be aware that if the corp remains a C corp, it will be subject to the personal service corp rules. One of the harshest is that any income left in the corporation is taxed at 35% from dollar one. The graduated rates starting at 15% do not apply.

          Good luck.
          • Re: Self Employed Consultant to Incorporation
            Lighthouse24 Ranger

            I'm not sure what "previous business arrangements" you might be referring to, but the general answer is "no." If "you" did it previously (as an independent contractor or sole proprietor), "you" still exist and are still accountable -- the corporation is a new and separate legal entity with business dealings of its own.

            As noted in the previous answer, there are steps you can take to transfer your old business into the new corporate operation, if desired.


            Good luck with your pending growth!
            • Re: Self Employed Consultant to Incorporation
              teamtwi Wayfarer

              Thanks all...I only asked because I feel the company I did business with might go "sideways" on me. We'll have to wait and see.
              • Re: Self Employed Consultant to Incorporation
                m.rick Wayfarer
                I am not an Attorney but you probably would be liable for the previous deals. Do not wait any longer, form your entity if for nothing else future protection. Look at, very basic info in one place. Its a good non-sales place to start.