Why every programmer should start their own business

1. You can write off everything that you buy related to your business, which for me is a 30% discount for almost everything I spend money on. You’d be surprised at just how much can be considered a business expense.
A. Eating out while at a job site (though they limit this to half the discount, so 15%)
B. Buying computer games, when used for ‘market research’
C. Buying computer parts
D. The portion of my home I use for my home office applied to my rent
E. Similar to D, but for utilities
F. Auto depreciation and expenses (again just for the job site, but for me that’s practically the only place I go)
G. Common supplies – paper, pencils

2. You can demand more money from those you work for, if you work as a contractor, which is now easier if you contract through your own business. See my Contract pay calculator. It’s not one-sided. It actually costs your employer/customer less to hire you.

3. Using some of the money from item 2, you can buy your own health insurance. That means you don’t lose your health insurance just because you lost your job. It also means you can pick the health insurance you actually want.

4. In CA, and perhaps other states, having your own company means you can buy group health insurance. By law, you don’t have to disclose preexisting conditions with group health insurance. This is why you can have your family insured when you would otherwise start a new job as an employee without them requiring that your wife and kids get a checkup and turn over their medical records first. If you just went and bought individual coverage you’d have to do that.

5. If you do get hired as a contractor, you get emotional benefits from being your own boss. The freedom is great too – decline meetings you don’t want to go to, come in whatever you want, work for other customers at the same time, and often maintain ownership of part all of your work Of course this can be abused and you can get in trouble, but as long as you get your work done the customer has no basis to complain.

6. Now that you actually have a business license (which takes only a couple of hours for everything), if you want to sell goods or services, or do contracting, it’s much easier.

7. If you incorporate as an LLC, then you are personally shielded from the liabilities of your business. This means if you were to contract for or sell to company X, and they sued you for whatever reason, the most they could get is whatever was in your business bank account, and your business assets at the time you were served. The franchise fee in CA is $800 a year, less in other states. Keep your business account separate from your personal account, and you no longer have to worry about losing your house. (Within reason, see Piercing the corporate veil)

The only real downside is that contract work tends to be temporary. Some managers have this perception. However the way I see it, it’s no less temporary than being an employee, as employees can be fired too. As long as you are making the company money and doing a good job they have every incentive to keep you on as a contractor.

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