Contract Employee Corporation
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Why Bother?
Start your own company?
The CEC concept.
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Normal Company Accounting
 
Corporate Gross Revenue
- Corporate Profit
- Corporate Taxes
- Administrative Cost
- Marketing Cost
- Finance Charges
- Equipment/Plant Costs
- Business Insurance Costs
- Benefit Admin Costs
- Contribution to Benefits
- Employee Expenses
- Employment Taxes
 
=  Employee Gross Wages
-   Contribution to Benefits
-   Employee Taxes
 
=   Employee Net Wages
-    Benefit Co-Pays
-    Non-available Benefits
-    Expenses
 
=     What's left...
        (Your Take Home Pay)
 
  
Look at what happens in a "normal" company.

It doesn't matter what business you're talking about, they all work the same. The gross revenue gets split up into a bunch of pieces before it even gets to you.

Okay, so Corporate Profit is supposed to be what's left over after all the other things are paid, but really...what do you think is the most important thing to the owners of the company? Normal companies plan for Corporate Profit first. And, because the IRS and State and Local governments will also want a piece of whatever profit is made, Corporate Taxes, are also figured in.

Next comes all the Administrative Cost...the executive salaries, and all cost of all the people it takes to manage the business. You can lump all the lawyers, accountants, and human resource people into this. Whatever the product, someone has to sell it... Marketing Cost...advertisements, brochures, salaries, commission... all that. If it's a manufacturing company we're talking about, there's Equipment/Plant Costs. All prudent companies carry some form of Business Insurance. Depending on the product line or business discipline involved this may be fairly cheap, or, in the case of companies that may incur large liability claims, it may be fairly expensive.

Assuming the company offers some benefits, there is Benefit Administration Costs and the Contribution to Benefits the company makes.

The next thing...Employment Taxes...usually take a little explaining.

Most employees think, "They take my taxes out of my check. The company only pays taxes on the profits it makes."

Not true.

The IRS, State, and sometimes Local Governments all tax companies for the privilege of having employees. There are Federal and State Unemployment taxes, State disability taxes, and the Employer's portion of Social Security and Medicare.

After all of that, the company pays employees a salary or hourly wage. That's the "Gross Wages" that appears on your paycheck. Most companies now days require employees to pay for some of their benefit cost. Some of this Benefit Cost is paid with "before tax dollars". For example, if you contribute to your company's 401k benefit, that money is not subject to Federal Income Tax. However, it is subject to Social Security and Medicare taxes. Depending on the state you live in, it may also be subject to state and local income taxes.

Next, Employee Taxes are withheld from your paycheck. Federal, State, Local income tax. Then there is your portion of Social Security and Medicare, and, in some state or cities, additional taxes that you pay because you're working.

Also, if your company's benefit programs...like health insurance, for example...has a deductible or co-pay for doctor visits or prescriptions, you pay that with "after tax dollars". The same thing goes for Non-available Benefits...like dentists, or eye exams. And then, you might have to pay for your own expenses...tools, computers, and the like. Yes, some of that is deductible if you itemize when you file your Federal Income Tax Return, but the IRS has limits. Medical deductions only apply if you reach a certain threshold depending on your income. Office in the home expenses are hard to justify.

So what can you do?

Why not set up your own company? Here's why.
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Disclaimer: Note that this site is still under construction. Details related to the concept presented here may change before the site is completed.