Why do some clients only work with incorporated consultants?
This is mainly a tax concern. Some clients have been burned either by “independent” consultants working on long term projects who turn around and place a claim on the client for benefits. Other are concerned that the state or federal government will reclassify an independent consultant as an employee of the client and then require back payroll taxes (and penalties) of the client. As a result, many clients want their consultants to be an employee of someone, other than themselves. Consultants solve this either by incorporating themselves, or by working as an employee of some 3rd-party. In other cases, a consultant will be forced to work through or hire on as an employee of one of the client’s “preferred vendors” who have met certain criteria of the client, including taking responsibility for exposure regarding payroll taxes.
