Independent Consultant vs. 1099

When you get your first opportunity to go 1099, you may have the option of operating as an "independent consultant" or operate as a sub-contractor.

On a sub-contract, the prime has a formal arrangement with your company, not you, and the company is required to provide qualified personnel i.e. you.

Often this requires having the government approve the sub-contract or teaming agreement, and can be a bit slow.

However, if you want the option to grow your company down the line and hire other people on the contract, you should do this.

With an "independent consultant" agreement, however, the company is hiring you directly. They may still use your LLC, but generally you just sign a short consulting agreement.

There are a few advantages to this approach. The paperwork is potentially onerous and can be faster than doing a more involved sub-contract.

In addition, going 1099 as an independent consultant may allow you to 1099 for a company that is, itself, a contractor.

Many government contracts prohibit "2nd tier contracting" which means sub-contractors can't sub-contract out work.

However, I've experienced a few situations where the sub-contractor can bring on 1099s as independent consultants, even when the 2nd tier sub-contracting restriction is in place.

I'd say that if your only opportunity to go 1099 is as an "independent consultant," just seize the opportunity. Once you're working on your own you'll find other opportunities to get a more formal sub-contract.

Want the full playbook? Check out Going 1099.