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Moonlighting as a software developer: employee or independent contractor w/ LLC?
I've been in a similar situation before. While contracting, sometimes the recruiting agency would allow me to choose between being a W2 employee or invoicing them via Corp-2-Corp. I already had a company set up (S-Corp) but the considerations are similar. Typically the C2C rate was higher than the W2 rate, to account for the extra 7.65% FICA taxes and insurance. But there were a few times where the rate offered was identical, and I still choose C2C because it enabled me to deduct many of my business expenses that I wouldn't have otherwise been able to deduct. In my case the deductions turned out to be greater than the FICA savings. Your case is slightly different than mine though in that I already had the company set up so my company related costs were "sunk" as far as my decision was concerned. For you though, the yearly costs associated with running the business must be factored in. For example, suppose the following: Due to these expenses you need to make up $3413 in tax deductions due to the LLC. If your effective tax rate on the extra income is 30%, then your break even point is approximately $8K in deductions (.3*(x+3413)=3413 => x = $7963) So with those made up numbers, if you have at least $8K in legitimate additional business expenses then it would make sense to form an LLC. Otherwise you'd be better off as a W2. Other considerations: