Embedded Systems December 2000 Vol13_13

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file a ficti tious business name state- ment. Your city government offices will have someone who can help you find out all of the requirements. You don 't need a reseUer's license and you don't need to charge sales tax since you will be providing a service. Only products are taxabl e, not ser- vices. You will need to file your state and fede ral income u'lXes quarterly since no one will be withholding them from your paychecks. It's important to talk to an accoun tant about thi s before getting started. The accountant can al 0 teU you which items and expenses are tax deductibl e. You do not need to incorporate! This is a common misconception that causes consultants to waste hundreds of dollars and hours of time filin g incorporation papers. Forming a cor- poration is not required by the gov- ernment nor by your clients, and it does not necessarily protect you from liabili ty. If you plan on expanding and you wan t to hire your own employees, you may wish to Otherwise, don 't bothe r. incorporate. What about the IRS? The IRS has a particular set of guide- lines for determining who is a consul- tant and who isn 't. The more criteria you meet, th e more likely you will pass an IRS audit. A key point for a consul- tant is that you detennine your own hours and me thods of workin g. Even if you work at the client's premises, you should have the ability to come and go freely without being constrained to normal working hours. Similarl y, you should have the abili ty to work as many or as few days of the week in order to get your work done. The client can only demand th at the work be completed. imilarly, the IRS may get suspi- cious if you work fo r only one client for a pl-olonged period of time, say greater than a year. Unfortunately, the IRS has a lot of leeway in these mat- te rs, and the rules seem to change periodically. If the IRS should decide that you are an employee rather than a consulta nt, your cli ent will be responsible fOl- paying half of your Social Securi ty tax, and your business deductions will be disallowed. This happens rarely, but to be prepared, it's a good idea to ask the IRS for a copy of their guide lin es on Independent Conu-actors. Should I go out and buy lots of equipment? Yes and no. To be successful you will need to contact a lot of people and keep track of your contracts , invoices, and so on. For this, a computer with word processing, da tabase, and spreadsheet softwal-e is essential. An inexpensive system can be put togeth- er for under $1,000. But don't go over- board. Keep your expenses low by pur- chasing only essential equipment. As your business grows you can invest in better, more expensive tools. Do I really need a contract? Absolutely; even if you are doing busi- ness wi th your mother. A contract is not a sign that you mistrust your clie nt. Rathe r, it is used to make absolute ly certa in tha t you bo th understand what is to be done and how. You don' t want to be two weeks in to a six-month proj ect and find out that the client wants to pay you at com- ple tion and you we re expecting a check next week to feed your three kids. Many companies have a standard contract, but it usually protects them more than it does you. If they insist on using their conu"act, insist on putting in clauses for your protection. To make up your own standard contract, see a lawyer or an established consul- tant. The important items in the con- tract are: when you will invoice the client and when they will pay you; who can terminate the contract and how; what are the milestones and de liver- abi es; the length of time the contract will run; that you are not liable for any damages resulting from your work; and how to resolve contractual dis- agreemen ts. How much should I charge? How much you charge depends on many fac tors, including how badly you need business and how badly the client needs your services. It is good to contact othe r consultants in your field who work near you. Ask them how much they charge. You may want to charge less when you start out in order to encourage people to go with you. Once you are established, you can charge mOl"e money, particularly for j obs requiring more specialized experti e. Similarly, if work is slow you may wa nt to charge less. Some consultants charge on a per j ob basis and some on an hourly basis. Hourly is, o f course, to your advantage, because if the specification of the proj ec t changes, which happens often, you are not penalized. If you must charge on a proj ect basis, either because the cli ent insists or it is stan- dard practice in your field, be sure to estima te the time to pe rform a ll aspects of th e j ob. Then assume things will go wrong (they always do), and add more time to your estimate. Then decide how much money you want to make for this amount of time. This is your bid. When should I start? If you' re really interested in consult- ing- you're not afraid of the risks and you're confident in your abilities- tart sending out resumes right now. The opportunities are out there and the first people to grab at them are going to be the ones to get them. i 1 E QI esp Bob Zeidman is the 1;resident of The Chalkboard Network ( which 1 Jrovides in-depth Internet-based C01l1"S- es on high-tech subjects. I-Ie has been working in the electronics industry f or over 17 years and was an independent consultant fo r J 3 of those years. Bob is the author of the lext- book, Verilog Designer's Library from Prentice-Hall, as well as a number of articles on enginpering and business. He holds an MSEE from Stanford UniveJ"Sity, and a BSEE and a BA in physics f rom Cornell University. Embedded Systems Programming DECEMBER 2000 163

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