How to Transition From Employee to Employer?
Having been both I see the pros and cons Employers: I personally hated all the paperwork.  Government forms, legal protection, insurance, taxes, payroll, accounting, year ends, bank accounts, inventory tracking, expenses. The best bosses don't worry about the product, they worry about maintaining an environment that is good for the product.  Good employees who are happy will make good products that you can sell to customers who are happy with your company. I personally went back to employee because I wanted to go home at night and forget about work.  Employers cannot do that.
"If they directly paid for your education, it is possible that it wouldn't count as taxable income to you according to the IRS, depending on the amount: If you receive educational assistance benefits from your employer   under an educational assistance program, you can exclude up to $5,250   of those benefits each year. This means your employer should not   include those benefits with your wages, tips, and other compensation   shown in box 1 of your Form W-2. This also means that you do not have   to include the benefits on your income tax return. source: http://www.irs.gov/publications/p970/ch11.html However, your situation is a bit trickier since they are sort of retroactively paying for your education. I'd think the answer is ""Maybe"" and you should consult a tax professional since it is a gray area.  Update: On further research, I'm going to downgrade that ""Maybe"" to ""Probably not, but hopefully soon."" The reason I am doing so is that there is a bill in Congress specifically to allow what you are asking, which presumes that you currently can't do this.  The Bill is HR Bill 395 ""The Student Loan Employment Benefits Act of 2013"" sponsored by rep Steve Israel (D). It has co-sponsors from both parties, so that is promising for it's passage, I suppose. However, it appears to be still early in the legislative process. If this issue is near/dear to your heart maybe you should call your congressman. Summary of the Bill: (from govtrack.us) Student Loan Employment Benefits Act of 2013 - Amends the Internal   Revenue Code to exclude from the gross income of an employee amounts   paid by an employer under a student loan payment assistance program.   Limits the amount of such exclusion to $5,000 in a taxable year. Requires an employer student loan payment assistance program to be a   separate written plan of an employer to provide employees with student   loan payment assistance.  Defines ""student loan payment assistance"" as   the payment of principal or interest on any indebtedness incurred by   an employee solely to pay qualified higher education expenses which   are paid or incurred within a reasonable time before or after such   indebtedness was incurred and are attributable to education furnished   during a period in which such employee was a student eligible for   federal financial assistance." "I think you're really underestimating the degree of ageism that occurs in hiring and just how much youth is favoured in the job markets. Experience costs more and it depreciates quickly. In most case employers  will prefer someone less experienced who comes across as mature and less expensive than someone who is more experienced but has been our of the industry for a year or more. The attitude of ""you can't teach an old job new tricks"" rules. Your 30s represent the ideal sweet spot: you are still young and you have some experience. If you're not in full preparing for retirement mode by 40 or 45, you're going to have a bad time. GenXers have lost most of their sweet spot and if the recovery doesn't happen, they will have lost all of it.   Yes, Millenials have it pretty bad too -- no one is disputing that -- but GenX was screwed from the start. We have larger generations on either side of us. We are a transitional generation that started out before computers went mainstream but ended after, so we have a hard time competing with Millenials who have lived with technology all their life. The whole structure of the world changed right under us, i.e., the end of the cold war. And this change significantly increased available labour. Even before 2008 the talk was all about how screwed the GenXers where because of the power of Boomers and the dominance of the Millenials. We already had our backs up against the wall then 2008 struck.  Also, I'd much rather be 28 and looking for a job than 40+ and looking for one. It's so much easier to jump industries or cites or countries when younger and you don't have children to look after. The 28 year old is not locked a career path and has lost a ton of political capital and credibility for having lost their job. The 40+ year old will always have to face questions: why wasn't he/she one of the one the company kept during the layoffs? will he/she be able to learn and adapt to the new job? will he/she be comfortable reporting to someone younger? will he/she be will to sacrifice time away from kids to work longer hours to compete with younger employees?" "Yes, it applies to control groups.  If I remember correctly common ownership rules are used to determine ""Applicable Large Employer"" status but if the time comes to owe a penalty, only the actual entity missing the mark will owe a penalty, not the entire control group. This is an excerpt from Section 4980H (the section that lays out employer requirements and penalties) (16) Employer. The term employer means the person that is the employer of an employee under the common-law standard. See § 31.3121(d)-1(c). For purposes of determining whether an employer is an applicable large employer, all persons treated as a single employer under section 414(b), (c), (m), or (o) are treated as a single employer. Thus, all employees of a controlled group of entities under section 414(b) or (c), an affiliated service group under section 414(m), or an entity in an arrangement described under section 414(o), are taken into account in determining whether the members of the controlled group or affiliated service group together are an applicable large employer. For purposes of determining applicable large employer status, the term employer also includes a predecessor employer (see paragraph (a)(36) of this section) and a successor employer. Link to the Federal Register" In the USA, you probably owe Self Employment Tax. The cutoff for tax on this is 400$. You will need to file a tax return and cover the medicaid expenses as if you were both the employer and employee.  In addition, if he earns income from self-employment, he may owe Self-Employment Tax, which means paying both the employee’s and employer's share of Social Security and Medicaid taxes. The trigger for Self Employment Tax has been $400 since 1990, but the IRS may change that in the future. Also see the IRS website.  So yes, you need to file your taxes. How much you will pay is determined by exactly how much your income is.  If you don't file, you probably won't be audited, however you are breaking the law and should be aware of the consequences. "TL;DR: Get a tax adviser (EA/CPA licensed in your State) for tax issues, and a lawyer for the Operating Agreement, labor law and contract related issues. Some things are not suitable for DIY unless you know exactly what you're doing. We both do freelance work currently just through our personal names.   What kind of taxes are we looking into paying into the business   (besides setup of everything) compared to being a self proprietor?   (I'm seeing that the general answer is no, as long as income is <200k,   but not certain). Unless you decide to have your LLC taxed as a corporation, there's no change in taxes. LLC, by default, is a pass-through entity and all income will flow to your respective tax returns. From tax perspective, the LLC will be treated as a partnership. It will file form 1065 to report its income, and allocate the income to the members/partners on schedules K-1 which will be given to you. You'll use the numbers on the K-1 to transfer income allocated to you to your tax returns and pay taxes on that. Being out of state, will she incur more taxes from the money being now   filtered through the business? Your employee couldn't care less about your tax problems. She will continue receiving the same salary whether you are a sole proprietor or a LLC, or Corporatoin. What kind of forms are we looking into needing/providing when   switching to a LLC from freelance work? Normally we just get 1099's,   what would that be now? Your contract counterparts couldn't care less about your tax problems. Unless you are a corporation, people who pay you more than $600 a year must file a 1099. Since you'll be a partnership, you'll need to provide the partnership EIN instead of your own SSN, but that's the only difference. Are LLC's required to pay taxes 4 times per year? We would definitely   get an accountant for things, but being as this is side work, there   will be times where we choose to not take on clients, which could   cause multiple months of no income. Obviously we would save for when   we need to pay taxes, but is there a magic number that says ""you must   now pay four times per year"". Unless you choose to tax your LLC as a corporation, LLC will pay no taxes. You will need to make sure you have enough withholding to cover for the additional income, or pay the quarterly estimates. The magic number is $1000. If your withholding+estimates is $1000 less than what your tax liability is, you'll be penalized, unless the total withholding+estimates is more than 100% of your prior year tax liability (or 110%, depending on the amounts). The LLC would be 50% 50%, but that work would not always be that. We   will be taking on smaller project through the company, so there will   be times where one of us could potentially be making more money. Are   we setting ourselves up for disaster if one is payed more than the   other while still having equal ownership? Partnerships can be very flexible, and equity split doesn't have to be the same as income, loss or assets split. But, you'll need to have a lawyer draft your operational agreement which will define all these splits and who gets how much in what case. Make sure to cover as much as possible in that agreement in order to avoid problems later." "/endthread   But honestly, we should have a link to something like this in the sidebar, since quite a few people visit this subreddit for ""what are my chances / how do I break in"" advice. A lot of your response applies to others as well (and honestly it's kind of annoying seeing redundant threads about career advice).   Either that, or we direct everyone to /r/financialcareers." "I'm no lawyer and no expert, so take my remarks as entertainment only. Also see this question. If you have a U.S. SSN which is eligible for work, they may be able to pay you on 1099 basis with your SSN as a sole proprietor, unless they have some personal reason for avoiding that. So perhaps try asking about that specifically. HR policies can be weird and tricky, maybe a nudge in the right direction will help. Not What You Asked: regardless, I might recommend you register as an LLC and get an EIN (sort of SSN for companies) for a variety of reasons. It's called a ""limited liability"" company for a reason. You may also have an easier time reaping various business-related rewards, like writing off expenses. If you do so, consider a state with no income tax like Wyoming. (Or, for convenience sake, WA if you live in BC, or maybe NH if you live in Ontario.. etc.)" This will be difficult to achieve.  It can be done, but it's very rare to have an agreement where your employer is willing to max out your contribution limit unless you are a partner in the business or a family relation. In this situation the extra employer money would probably come from a profit sharing contribution. If your employer increases your match, others are correct that your employer would have to increase the match for everyone. Not so with a profit sharing contribution. This is assuming 2 things though: Both of those are BIG if's, and I'd say 99% of the time it's not gonna happen for either of those two reasons. Your chances are better if you don't own >5% of the company, don't make over $120,000/year, and are related to you employer. Good luck!