Start off as a solo 1099 or form a company?

A reader asked me recently why I went the solo 1099 route instead of forming a "real" company with employees at the outset.

It's a good question.

For my situation, I never intended to have employees. I just wanted to work for myself. Employees came later and I'm only now focusing on growing the company that way, 8 years after I first went 1099.

But here are a few reasons why you'd want to start off solo instead of trying to hire employees right away:

• It's faster to hire yourself out then to hire your company out
• You get an immediate bump in pay if you do it right
• You can establish a good reputation with primes which makes it easier to get opportunities to bring on additional staff
• You can learn the mechanics of running a business
• It's less stressful to start recruiting employees when you have a healthy cash flow from the higher 1099 pay

This isn't to say you shouldn't start a new company right off the bat. I think that path would be best if you have the following in place:

• Experience recruiting and managing a team at a government contracting company
• 5-10 people who indicate they'd be willing to work for your new company if you had the work
• A few handshake agreements with PMs that say they would sub-contract work to your company if you had the people
• Your administrative/operations structure in place (payroll, accounting, etc.)
• Financing for employees; you need at least 2 months of payroll ready to go

For most people learning the ropes as a solo 1099 is the path I'd recommend.

Want the full playbook? Check out Going 1099.