An Umbrella is a company through which contractors can work more conveniently. As a member, you are in charge of your own Division (profit center) and are responsible for running it profitably, just as you would with your own business. However, the Umbrella provides the overall corporate shield and company identity, along with other valuable services that could be difficult or impossible to afford on your own. In addition, each Division is separate, so that your success is entirely up to you and does not depend on other Divisions. You are responsible only for your own Division, and are not legally liable for what the other Divisions do. This gives you the benefit of having your own virtual corporation, without having to incorporate. We take care of the corporate structure and benefits, leaving you to concentrate on what you do best.
If you don't do anything special to set up your business, you'll have a Sole Proprietorship. However, many deductions are limited or unavailable, especially those having to do with health insurance and medical expenses. In addition, Sole Proprietors statistically have the highest risk of being audited, and a successful lawsuit against your business can cost you your personal assets as well.
Benefits can still be hard to find for a small business. And corporations can take significant time and expense to run properly, since there are complicated legal and tax requirements.
Because Umbrellas are larger, they can often get group benefits much more economically, such as retirement plans and medical, dental, life, and other insurance. They can manage cash flow more effectively and use collection agencies as needed. They can keep someone full time to maintain their corporate structure in the face of changing legal and tax requirements. Their accounting reports can give you the data you need for your tax returns. And they can remind you of important tax deductions you might miss.
RMP Consulting Partners LLC ("RMPCP") is a computer consulting firm in Dallas that has developed a unique Umbrella service to help our consultants cope with these problems. Because our industry is subject to discriminatory tax rules, it was even more critical that we provide these services, and that we do it right. Apparently, we have done a good job, since most of our consultants find their own clients and bring them to us to use our Umbrella service. This has doubled our annual revenue 3 years in a row. Now we have consultants and clients in many states.
The President of RMPCP's corporate Manager is Robert M. Pritchett, a computer consultant with 29 years of experience. RMPCP is also a member firm of the Independent Computer Consultants Association, whose code of ethics promotes professionalism in our industry.
We developed our modular structure before we even heard of Umbrellas, so we did it differently than most. As a result, we found tax saving opportunities that most Umbrellas overlook. Our setup is based on commonly known tax rules but no one else thought to set up an Umbrella the way we have, so this gives us a proprietary competitive advantage. That's why we have a simple Non-Disclosure Agreement to be signed before we can give you the full details of how our tax advantages work. However, this does not slow down the process of joining us, unless you want it to.
No. We use a staff leasing firm (also called a Professional Employer Organization, or PEO) to provide our payroll and most benefits, because they can do this more economically due to their large size. This also gives you the familiar advantages of being an employee. However, we provide our tax advantages directly, because you cannot get them from a PEO. This gives you the best of both worlds - the simplicity and benefits of an employee, and the tax deductions of an Independent Contractor. To achieve this, you will receive most of your money directly from us, and the rest in your semimonthly paycheck from the PEO.
We normally process checks in less than a week after we receive payment. Factoring is also available so that you can receive most of your money even before your client pays us. It only costs about 1-3% in most cases, and is highly recommended when starting a new contract or if you have travel expenses.
Not really; in fact, the main point of our service is to make things easier for contractors by taking care of most of the legal and tax hassles, such as quarterly estimated tax payments. Even those who have never been contractors before can do so easily with our help. This gives you more time to concentrate on your work.
Depending on your rate and other details, your net cost could range from around 2% to less than nothing, considering our unique tax advantages and what it would cost you to incorporate and find comparable group benefits on your own.
The special way that we are structured provides unique tax advantages you cannot get from any other Umbrella. Your tax savings effectively pay for most or all of our fees. For example, let's say you're single with no children and no deductions, you work 50 weeks/year for 40 hours/week at $50/hour, and you don't want to make quarterly estimated tax payments; and let's ignore state taxes. A sole proprietor would pay a whopping $35.5K in taxes, keeping only $64.5K (based on 2000 tax rates). If you work through RMPCP instead, even after our fees, you still keep $62.5K after taxes. Our services cost you only $2K/year = $1/hour = 2%. That doesn't even include what you save on benefits.
A SIMPLE-IRA similar to a 401(k); worker's compensation, health, dental, cancer, disability, life, and other insurance; a Flexible Spending Account; and dependent care. We may also be able to develop custom benefits if needed.