What are the pros and cons of working with different contract types, such as W-2, 1099, or C2C?

1 W-2 contracts

A W-2 contract means that you are an employee of a staffing agency or a third-party employer that pays you a salary and handles your taxes, benefits, and insurance. You are assigned to work for a client for a specific period of time, but you are not directly employed by them. The main advantage of this contract type is that you have more stability, security, and protection as an employee. You also do not have to worry about invoicing, billing, or tax filing. The main drawback is that you have less flexibility, control, and autonomy over your work. You also may have lower rates, less negotiation power, and more deductions from your paycheck.

2 1099 contracts

A 1099 contract means that you are an independent contractor or a freelancer who works for a client on a project basis. You are responsible for your own taxes, benefits, and insurance. You invoice the client directly and get paid based on your agreed terms. The main advantage of this contract type is that you have more freedom, choice, and creativity over your work. You also have higher rates, more negotiation power, and fewer deductions from your income. The main drawback is that you have more uncertainty, risk, and liability as an independent contractor. You also have to deal with more paperwork, accounting, and tax compliance.

3 C2C contracts

A C2C contract means that you are a corporation-to-corporation contractor who works for a client through your own business entity, such as an LLC or an S-corp. You are essentially a business owner who provides services to another business. You invoice the client through your business and pay yourself a salary or a dividend. The main advantage of this contract type is that you have more tax benefits, deductions, and savings as a business owner. You also have more credibility, professionalism, and scalability as a corporation. The main drawback is that you have more complexity, cost, and regulation as a business owner. You also have to set up, maintain, and dissolve your business entity according to the laws and rules of your state.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?