Incorporate yourself

Incorporate yourself

Incorporation is scary for anyone who has not done it before. It is not something that you just do in more normal circumstances when you are working the W2 9-5 life. However, the tax and personal finance benefits greatly outweigh these fears and is a vital piece in the finance toolbox which could shave years off your path to financial independence.

This article is base on several posts on the ChooseFI facebook group in which there was a lot of confusion and uncertainty about incorporation and how incorporation works. This post intends to clarify those specifically for the USA audience.

Why incorporate?

The main idea that you need to understand about incorporation as an individual is first that the goal is: “tax sheltering your income through the fact that as a corporation you apply your deductions ‘pre’ tax, whereas as an individual your deductions are taken ‘post’ tax”. I can’t state this enough, this is an absolutely huge advantage that corporations have over individual filers.

I’ve seen tax rates for single-owner corps at 3.5% for Federal and 0 for state.

Personally I have had a large range but with completely legal deductions (and I am conservative with my deductions and trust my CPA) for all my business travel and moving I am usually in the 10% range.

Compare that with the following brackets table for 2018

Table 1. Tax Brackets and Rates, 2018 (source)

Rate Unmarried Married Heads of House
12% $9,525 $19,050 $13,600
22% $38,700 $77,400 $51,800
24% $82,500 $165,000 $82,500
32% $157,500 $315,000 $157,500
35% $200,000 $400,000 $200,000
37% $500,000 $600,000 $500,000

If you are a FI/FIRE person you will obviously see how your savings percentage can be wildly increased. This can easily shave years off the amount of time you would have to work to get to financial independence. For me, my take-home is 14% higher, yes some of this is eaten up with insurance but I will cover that below.

More advantages are:

  • A corporation keeps the money in the bank and can still use it and get interest on it instead of handing it over to the government each payday.
  • A corporation does not have to justify getting money ‘back’ they simply justify why the money was not taken in the first place.
  • A corporation can write off many operating expenses that an ordinary person uses and needs, things like electricity, rent and phones that an individual cannot write off but are vital for a company to function.
  • A corporation can write off additional items like food and gifts at a much larger rate than a typical individual, even healthcare and things like yard work.
  • If you are incorporated you can set your personal salary to a tax beneficial amount, like $0 (however there are some issues with this that you will want to discuss with your CPA)


Before we start this we need to address the issues you may have heard about and then a few things that you may have not heard about.

  • Taxes: this is the absolute number one thing that is a pitfall. You can do your own but I would HIGHLY advise against it. For most 1099 employees doing their ‘own’ you can do TurboTax and it will work reasonably well. However, nothing beats a good CPA who is used to small businesses. I would say avoid places in strip malls like H&R block as they specialize in personal taxes.
  • You will want to keep all your receipts, this is important for if you find yourself with an audit. (I keep mine in manila envelopes, one for each month of the year with the month/year written on the outside.) and you will need to keep them for seven years.
  • No matter if you incorporate yourself or use a CPA, you must have self discipline and are going to need to learn to be very good at budgeting and organizing all your purchases and charges, I use Tiller for this. If you don’t have discipline then it can cause you a lot of pain.
  • Fee’s are an issue, in some states a yearly corporation fee of $800+ is common.
  • You will need to work on your corporate credit in addition to your personal credit.
  • If you don’t pay yourself a salary it can limit your personal income statements which can impact your ability to make large purchases like a home.
  • You are going to have to get your employer on-board, most employers will work with you on this though as typically an employer would rather an employee be a 1099 “independent contractor” as it shifts the burden of paying the fica taxes (medicare and social security) and federal tax withholding obligations to the employee.
  • Health Insurance, see the section below.
  • Professional liability insurance is another cost. HisCox is the company I use and they are very reasonable.

CPA or do it yourself?

I am going to suggest that you use a CPA, for both company incorporation and for business taxes, if you are a salary worker making over $60,000 in a tax advantaged state, a general rule however is that if you are making less than $70,000 you would be well served to handle your company incorporation and taxes yourself.

That said, CPA’s are worth their weight in gold, I cannot say nice enough things about my CPA, he has really made my life much better/easier. I give him my login and let him export my finances and then he builds up my tax profile based on that.

Find a CPA - click on your state and you can drill down to find a CPA. Many specialize in specific industries, but typically you will want a ‘business services’ CPA who also can handle both corporate and personal taxes.

You are going to want to talk with your CPA and figure out if they are familiar with what you are doing and would be a good fit. They may be able to refer you to another CPA who is a good fit if they do not do your specific type of corporate+taxes. How I would interview a CPA was asking if they were familiar with FEIE tax filing (digital nomad outside the country for 90% of the calendar year) and could help me with that, very few were familiar with it and the one I ended up with is.

1099, FEIE and so on

First thing, NEVER be a true “independent contractor” you end up owing all kinds of money and it is not worth it, not at all. You want your ‘company’ to be the ‘contractor’ so this becomes a business to business relationship, and then your company pays you. The reason for doing it this way, besides the obvious liability reasons, is that the paycheck amounts go on your company pre-tax income and not on your personal taxable income.

Then the question remains, ‘can’ you/youCorp be a contractor for your company. The rules, which are fairly flexible are if the position requires the employee to be directed as to how, when, where and with what to do the job, then he/she is a W2 employee. If however, the job will be done independently, then a 1099 is possible. What this means is that you cannot be a 1099 if you are working at a department store or other traditional brick and mortar store and have a boss who directs you.

Depending on the type of job, obviously online and office workers have it a lot easier here, you should inquire about swapping to being a contractor.

TIP: The book The 4-hour workweek has a good set of ‘scripts’ for getting your job to let you work remotely. This can, and should, be combined with going 1099.

FEIE I’ve mentioned the FEIE a couple of times, it is the Foreign Earned Income Exclusion a Digital Nomad specific exclusion that allows you to entirely deduct from your taxable income up to $100,800 per calendar year where you spend less than 35 days within the USA. You can combine this with housing and food costs to exclude a pretty massive amount of income from taxation. Most of the DN’s living in SE Asia pay $0 in taxes thanks to this.


You can do regular ACA plans and spend a lot of money -or- you can do ones which do not cover pre-existing conditions you can find some plans at places like UHC.

If you are healthy and don’t expect to need a lot you can do a healthcare sharing ministry like Liberty Health Share which is drastically lower than traditional insurance.

for digital nomads

Let’s do this thing!

If you are doing this yourself: You may want to peruse the books section at the bottom of this article before pulling the trigger. Here are some resources that you can use.

With a CPA

Talk with your CPA about the following:

  • Type of corporation you will form, S-Corp or LLC, S-corp is what I personally have used for the last five years and what is generally recommended for US citizens. I’ve had an LLC a C-corp and now a S-Corp and S-corp is the easiest to manage.
  • Incorporation, name of your company.
  • Getting a bank account and initial credit card set up (BofA has a nice starter package).
  • Your CPA should be a C/O on a PO box for your company and be able to forward you things like credit cards and so on. If not, you can get your own, or use your residence. Talk with your CPA.
  • You need to discuss if you want to do your taxes quarterly or yearly, there are pro’s and cons of each. I do mine yearly so that I only have to pay my CPA once per year to handle the corporate taxes and he does those while also handling my own personal taxes. However, sometimes it is recommended to do them quarterly at first.
  • You need to discuss if/how you are going to do payroll.
  • You need to discuss disbursement of funds, i.e. I run everything through personal cards for the miles/points and then do large block payments from my corp accounts.

What about corporate credit and credit cards?

Corporate credit to start is going to be based off your personal credit but it is done differently. It is on a 1-100 score.

For credit cards, you should get one with your company account at your bank. Once you have established a little credit with your bank you can branch out and get cards from Capital One (spark cards) and then Chase (ink cards).

Books, videos, more resources

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About FINomad
FINomad is a life hacker, nomad and new father who is working towards financial independence.
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