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I am in Maryland, USA, and have worked as a consultant for close to two decades. Switching to C2C seems to be difficult and yet so many other companies are doing it.

I don’t understand what I am missing because, to me, contracting is just a different way to get paid. You would think it would benefit a company to not have to pay benefits, taxes, etc. In my case, there is no difference than if I was a full-time, salaried (W2) consultant, except for all the overhead I have to take care of. But so many people think C2C means “offshore” or “remote.”

And a lot of job ads say “no C2C.” Many of those companies that say W2 only are themselves contracting companies, or they have existing resources on a C2C basis, which seems contradictory.

And recruiters will offer to hire you on a C2C basis but only at the W2 rate (which is ridiculous). Why does it seem like recruiters don’t understand the difference in rates?

What I would like to know is... How do other independent contractors manage to get contracts to start out? It seems like job postings and job boards are not as helpful. Advice from experienced pros on what I am missing would be greatly appreciated.

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They are, mainly stemming from their legal department. Despite all the caveats that one may sign legal departments find two main reasons to discourage C2C.

The first is the Microsoft lawsuits of the early 2000's. Contractors were doing the same work as full time employees, but the FTEs received stock options and got wealthy. The contractors formed a class and won. This lead to a lot of different changes to the way contractors are handled among them C2C are still discouraged.

The second is taxes. While you may very well understand the tax law and hold back a portion of your C2C pay to pay the IRS and do proper quarterly filings, a large portion of people paid on 1099 do not. The last thing an employer needs is to have one of their "employees" in trouble with the IRS. They will be very unproductive, and they IRS can come back on the employer.

There is a third reason too, and that is as a C2C employee you work for yourself. So that manager cannot tell you to be present during core hours, attend meetings, and the like. Sure they could fire you, but as you know in the software industry these days it is hard to find good help. Managers have to be very careful about what they tell the C2C employees what they can and cannot do. With W2 contractors, a manager can simply call up the contract company and then they can tell you things.

Also C2C contractors may be not allowed by contracts with the business's customers. This holds true in many defense jobs. The US Government does not allow a lot of contractors to hire C2C.

C2C, especially with the new tax laws, are a really sweet deal. On the surface they are also a great deal for the employer yet they are still discouraged.

For the uninitiated, these terms apply to the US and are common in the tech industry:

C2C is corporation to corporation.

1099 is the way a "independent contractors" get paid, that is no taxes are withheld and they are responsible for their own social security and income taxes.

W2 is how most standard employees are paid. The employer withholds taxes and pays part of the social security.

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    So that manager cannot tell you to... Interesting point there. My experience has been the opposite - it's far "easier" for managers to control C2C staff because it's so much easier to sever ties with a contractor vs a direct employee, and direct employees have more protections under employment law anyways. – dwizum Jan 28 at 14:31
  • @dwizum not in a right to work state. Twice in my career my contract continued despite the company laying off full time employees. – Pete B. Jan 28 at 14:33
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    You must have been a valuable employee. I've only ever worked in right-to-work states and have apparently had very different experiences than you - contractors are the easiest low hanging fruit when you're cutting expense (they have almost no labor law protections, i.e. the WARN act doesn't apply, don't need to pay severance, etc). And even when cuts weren't happening, if a contractor told me they couldn't be there for my desired core hours, I'd show them the door and I would have a stack of new applicants' resumes on my desk before I'd managed to walk all the way back to it. – dwizum Jan 28 at 14:40
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    That seems like a creative trick to retain workforce by hiding your expense in a place no one is looking! – dwizum Jan 28 at 15:15
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    Well speaking of budget, also in many cases a department has a staffing budget that only considers salary and consulting dollars and not the “fully loaded” cost with benefits, and the work of tax withholding, etc is done somewhere else out of some other budget. It’s often a fallacy to ask why “a company” won’t do X, the real reason is often that the actual person you’re talking to is somehow disincentivized from doing X. – mxyzplk - SE stop being evil Jan 28 at 15:22
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In Canada, if you take on a developer as a contractor it must not just be "a different way to get paid." The developers must be managed differently and often provide their own equipment etc, otherwise they can be deemed to be employees. That deeming will cost the employer a fortune - they owe both their share and the employee's share of those taxes etc.

Assuming something similar applies in the US, you are asking them to take on a different way of working, plus do different paperwork, and so on, and to be at risk of costing the company a lot of money if they do it wrong. Plus, as you say, many of the people making the hiring decision don't realize that $X an hour as a consultant is not at all the same as $X an hour as an employee, and balk at the rates.

I have never had much success treating contracting as "just another way to get paid." If you want to be an employee, be an employee. If you want to be the independent expert who comes in for a while, with your own stuff, solves their problems, tells their people what to do, and leaves -- be that, and charge accordiingly.

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    Assuming something similar applies in the US essentially yes, it's the same. If you have people on contract but are literally treating them like permanent employees, you're in trouble. – dwizum Jan 28 at 14:28
  • but not if it's corp to corp - Corp to corp relations release them from this liability that they would otherwise have if it were a contractor under W2, at that point it's more or less one business paying another business for services. For this reason I was confused by the question, as I would imagine the companies would lean the other way, and prefer C2C over direct contractors, as I've worked for many companies that do not want the liability of direct contractors and only do C2C – schizoid04 Jan 28 at 14:37
  • Schizoid04, That’s what I would think too, but perhaps that’s where I am confused? How do you go about getting contracts? – Jason L Jan 28 at 14:39
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    @schizoid04 That's the theory but it often isn't as clear-cut as that. Exploitative contracting agencies have made sure that this kind of contract needs to be really watertight and enforced well because it turned out that in quite a few cases the C2C "contractors" were still de facto employees. So my best guess is that in OP's area someone got burned hard enough that all the other companies in the area adjusted their policies. – Borgh Jan 28 at 14:49
  • @Borgh that's possible. It seems like there is tightening of rules because of bad past experiences. – Jason L Jan 29 at 15:10
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IMHO, it is the one and only thing All mighty dollar

As much as people discouraged to think in that direction, everyone is counting money in other peoples pockets.

Even thou you are on the hook for ALL social and tax financial responsibilities, you also get a sweet limited liability and nice gross amount.

IANAL (I Am Not A Lawyer), but what is stopping you from being a W2 employee of your own corporation and contract out this way.

Also, get a business developer employee to look for contracts for you.

This way you can start growing and get a few more employees that will work on contracts as well

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  • "what is stopping you from being a W2 employee of your own corporation and contract out this way." That's generally what it means to work on a corp-to-corp basis: being a W2 employee to your own corporation. – Jason L Jan 29 at 15:09
  • @JasonL not really, There are numerous ways to withdraw money from the corporation, including but not limited to dividends – Strader Jan 29 at 15:24

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