Should I stay or should I go?!

Question

I am trying my best to sensibly evaluate whether or not to leave my secure but life-draining corporate job to work in a more ideal work environment. I would be working with a friend and his business partner helping them manage a burgeoning tech company that their investment firm owns a majority stake in. I will start out making slightly less money, but will be given a luxury company car, will work out of my home office with some light travel a few times a month, and the job has nearly unlimited growth potential because of a liberal bonus plan which includes partial ownership of the company's holdings and investments. They have said that they will structure the job pretty much however I want, either with me being self-employed or as an employee. The problem is, I don't know enough about any of that to know which is the most advantageous tax-wise and therefor I can't determine if I can afford the temporary pay cut. They insist I will be living more comfortably because I'll be keeping more of my money, but I have no idea if they're right about that. What can I do to help make an informed decision? My salary would drop from 73k per year to 70k, but I would have to purchase my own medical and life insurance for a family of 5. Due to current debts, we're living closer to the edge than we would like to be and I really need to be sure that this is going to move us in the right direction.

Answer 1

First of all price health insurance - and really assess the coverage. Use last years medical visits as a guide line to get a rough idea of how may co-pays etc. you may be looking at. You will probably be looking at $1500 a month for that. The company car will be a big boon, but check the IRS web site to see what portion of that you will have to claim as income - which you will own tax on.  If this new company will pick up the health insurance it would be a no brainer.  But remember the tech boom and bust in 2000.  Independent contractor you would be liable for your own workers comp insurance in case you are injured on the job and would have to pay your own taxes - this could be hard to do when you are living close to the edge and you have the cash in hand and the pile of bills on the table.  My gut says that you are best being an "employee" not an independent contractor. If this job does not work out, where would you be employed?  

Answer 2

hello - there are many different things to think about here.  personally i think you should get a financial adviser or CPA of some sort, explain this all to them and let them run the different scenarios for you - having a company car can cut down on car payments, having a home office can be deductible as well.  being self employed has pros and cons.  you can get health insurance for 18 months under cobra from your current employer, and while it will cost more that trade offs may be worth it.  good luck