W2 Vs. Corp to Corp

W2 Vs. Corp to Corp
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HI- I work as a W2 employee (no benefits) for an employment agency. The agency is in NJ and I live and work in CT. This was a 5 month contract that keeps getting extended and is going into 3rd year. I am paid $62/hour. The end client that I work for would be amenable to me working for them corp to corp (I would have to start an LLC or some other type of company).
One obvious advantage is I would be able to collect the entire salary from end client (I would cut out the agency I work for). I have no idea what the markup is from the $62/hour that I get but from what I’m reading that could be 30-40% or more. I’m trying to figure out if this is worth it for me (assuming I could get out of my contract with the employment agency). My contract says that I couldn’t work for the end client for 18 months if I were to leave the agency. I know the agency pays half of certain taxes and from what I could tell the agency would have to pay me unemployment when the assignment ends. I know I wouldn’t have these benefits if I went corp to corp. Just wondering if this would make sense as I’ve never had an LLC or any other business and I’m not familiar with the pitfalls. Thanks!


Hi, robxyz, and welcome to the community! There may be some legal benefits to being a W-2 employee where you live, and that would require talking to a labor law attorney. From a tax perspective, though, you could be better off as a contractor. If you were self-employed (and a single-person LLC counts), you could deduct your health insurance premiums and you’d have a lot more options to save for retirement. As a W-2 employee, you can contribute up to $6,000 to a traditional IRA (and its deductible if you don’t have a workplace retirement plan), but a self-employed person can contribute 25% of profits to a SEP IRA or up to $56,000 to a solo 401(k).

You can form an LLC pretty easily with an online legal service but I’d still recommend hiring a CPA, because self-employment taxes are more complicated and you really want someone who can guide you through this.

Hope that helps! Please feel free to ask any follow-up questions you might have. We love to help people get their finances in the best possible shape.


Thank you very much lweston! Sorry for the late reply- I’ll have to do some more research on this but this is very helpful!