Yes I know, I will talk to a CPA first...

I'm considering making a jump from a salary position working in manufacturing making low 6 figures to being an independent contractor (in a completely different line of work)

How does the math add up as far as what I make now vs what I would make if I were an S corp?

Let's say I make 100k now- what does that equate to as an S corp?  I imagine the tax savings are pretty good but to what extent?

No idea S Corp vs 1099, but quarterly taxes will bite you if you don't save well.

Lack of benefits should factor in as well.

And there is that Self Employment taxes you pay too.  15.3% As noted, the self-employment tax rate is 15.3% of net earnings in 2023. That rate is the sum of a 12.4% Social Security tax (also known as OASDI tax) and a 2.9% Medicare tax on net earnings

Bonus is that as an Independent Contractor you can write off to offset income pretty much anything job related as long as you save your receipts and it has some tie in to your work.

Cell Phone?
Work Truck?
Tools?
Internet?
Specialized Clothing?
Fuel?
Maintenance?
ect...

Good Luck.

Bigger_Hammer

See if they have a total compensation calculator at your full time job.  When you factor in benefits, 401k, etc you may have to net $200k to match $100k job.

Part of the hidden cost is that as a contractor there is no vacation, only downtime between contracts.  We also had a customer that was paying net 90, so that means that you needed to have access to funds to keep you afloat.

I should clarify as well-
For insurance I only pay for vision and dental, rest is
Tricare.

For 401k employer matches 50% up to 8% (cap of 4%)

I have permissive vacation time at work already.

I'm gonna crunch the numbers more but initially it is  looking like the lower pay and  savings in taxes won't even come close to what I make currently.

It is looking like to maintain current income I'd have to work 60+ hrs a week in a field I am inexperienced in.

One of the tricks of what you are talking, Freelancer, would be scooping up multiple clients.

Meanwhile the other trick is to bill/proposals in Lump Sum vs Time & Materials (hourly rate).

There is a reason why 3x is most industry standards of hourly multipliers for a "business" and why most freelancers, who are very profitable, bill-propose Lump Sum work. Proven methods of success.

Unless of course you can get your hourly rate very high to cover yourself and float the down times.

examples. $60 per hour, should be billing at $180 per hour and that would just barely break even when the whole equation is written out. Lots of bites of the apple at $180.

You might need to factor in marketing and sales costs.  Someone needs to be going after the next contract(s) while you're working on the present one.

Rule of thumb I was taught was 1099 needs to make double what a w2 makes to be close to even.

Pay roll taxes , insurance, vacation time, paid holidays, 401k contributions, ect all add up.

Thank you all. I think I've got everything I need to make a decision.

Gonna stick with what I've got

You're thinking like a wage slave.  Remember you have to pay BOTH halves of FICA - what you  pay and what your employer pays.

Do you plan on working primarily on a Time and Materials basis or Fixed Price/Level of Effort?

Long story short, you adjust your billing rate to get to the net pay you want.

You could do what I did and build a somewhat complicated Excel workbook to use accurate numbers binned as OH, G&A, Fringe, and Profit, or you can use the quick and dirty method - what you  want to make/year, multiply by 2 and divide by the number of hours you want to work. 1920 is a pretty fair number - accounts for paid vacation time and a some overhead/G&A hours to do your tax filings etc.  Either way you get disappointingly close to the same hourly rate you need to charge.

Based on my experience doing a minor amount of consulting work in retirement.  You will likely overestimate what you would be earning as an independent.  Paying the quarterly income taxes was a PITA as well.
If you have to work a 60 hour week to break even.  Wouldn't even consider it.

That's where I ended up after doing the research

I've personally fallen into the trap of buying myself a job when I thought I was going into business for myself.

When I looked at this a few years back. I was making about $50 an hour plus an amazing benefits package. For me to come close to breaking even. I need it to be at $150 an hour. My current benefits package is worth about $60,000 a year. When I was in negotiation with the firm that wanted to hire me as an independent contractor. I was talking between $175 and $200 an hour.