[thrav]

Out of curiosity, $200k revenue pre-tax? Or $200k take home in your pocket after operating expenses, taxes, health care, etc?

My friends who have consulted have pulled in some seemingly hefty sums, only to feel like they came out behind a good salary with good benefits.

[ryanwaggoner]

It’s not fair to compare pre-tax salary with post-tax cash flow from your business.

Generally you pay less in taxes for an equivalent net profit as a small business than you would with that amount as a pre-tax salary. You pay slightly more in SE tax (~8%) but you get access to other write offs that more than make up for it, especially with the recent tax reform (huge deduction for pass-through businesses). And you can take as much time off as you want, which may cost you, but the flexibility is nice.

And operating expenses for most consultants are very low. For me it’s just been a new computer every couple years and a tiny bit of software and hosting. Basically nothing.

Healthcare is a big one though, if you’re not covered via a spouse or something.

[skinnymuch]

But a good salary is pre-tax too unless you’re talking about the actual paycheck which is far lower than listed salary.

There are benefits. Like matching 401K, paid vacation (though if this isn’t long enough it can be a negative), and mainly, health insurance. Those should be counted for a normal salaried job. Otherwise taxes should be compared the same way, no?

[danielvf]

If you are self-employed in the US, you pay an additional tax before you even start your regular taxes, and this tax isn't affected by your personal deductions.

You also need to pay for your own computers, SAAS services you use, etc. The more you make, the less this becomes an issue.

[skinnymuch]

The additional tax being social security and Medicaid? That’s 7.5% extra. And like child says half of it is tax deductible.

How can a 7% difference mean you compare non tax salary to taxed self employed income? As was the point of my comment. It doesn’t make sense. The disparity is way worse if you do that.

Also it was never said to compare revenue to salary. I assumed profit would be compared to salary.

[mrhappyunhappy]

You can business expense just about anything. Also 50% of your Medicare and ss contributions if I remember correctly. Insurance premiums also 100% deductible.