Working as a contractor has many benefits, including choosing your projects, setting your hours, and working from home—however, some drawbacks include handling your taxes and finding your health insurance. An umbrella company can help take care of some of the administrative burdens of being a contractor by providing payroll services, invoicing assistance, and liability insurance. Here are nine advantages of using an umbrella company.
Nine Advantages of Using an Umbrella Company
1. Simplified Invoicing:
When you work with an umbrella company, you only have to invoice the umbrella company for the hours you worked. The umbrella company will then pay you after deducting taxes and other withholdings. This is much simpler than invoicing each client separately and keeping track of payments yourself.
2. Handles Taxes for You:
Umbrella companies handle payroll and tax withholding for their contractors. This means that you don’t have to worry about paying estimated taxes throughout the year or filing a self-employment tax return. Instead, the umbrella company will send you a W-2 form at the end of the year for tax purposes.
3. Provides Liability Insurance:
Most umbrella companies provide some form of liability insurance for their contractors. This can protect you if you are sued for something related to your work as a contractor. For example, if a client alleges that you did not complete the work you were contracted to do or did not do it properly, the liability insurance would cover legal expenses and any potential settlements.
4. Offers Health Insurance Plans:
Some umbrella companies offer health insurance plans for their contractors. This can benefit significantly if you do not have health insurance through another source, such as a spouse’s employer-sponsored plan. In addition, these health insurance plans are often less expensive than individual ones because they are group plans.
5. Simplifies Record Keeping:
Umbrella companies handle all of the paperwork associated with your projects, including issuing invoices and tracking payments. This can save you a lot of time and hassle regarding record keeping.
6. Eases the Burden of Self-Employment Taxes:
As a contractor, you are responsible for paying self-employment taxes, which can be a significant burden. Umbrella companies typically cover these contractors’ taxes, easing the financial burden of self-employment.
7. Provides Access to Group Discounts:
Umbrella companies often have group discounts for their contractors. This can include discounts on health insurance, office space rental, and other business-related expenses. These discounts can save you a significant amount of money.
8. Offers Retirement Plans:
Some umbrella companies offer retirement plans, such as 401(k) plans. This can be a great benefit if you cannot participate in an employer-sponsored retirement plan.
9. Gives You More Time to Focus on Work:
When you use an umbrella company, you don’t have to worry about the administrative tasks associated with being a contractor. This frees up your time to focus on finding and completing projects.
If you are a contractor, an umbrella company can provide many benefits, including simplifying invoicing and handling taxes. They can also provide liability insurance and access to group discounts. Consider using an umbrella company to ease the administrative burden of being a contractor.