Re: Transition from employee to consultant--any gotchas?
Regardless of how open the company is about paying you a retainer for your services, or selling you equipment for a buck, I would take your severance pay in lump sum.
I don't have the option of how the severance gets paid. I'm not in control of the check writing process.
You said yourself that the company is on
it's last legs. If you don't get the money up front, there is a good chance you will never see all of it.
Entirely possible. Nothing I can do about that.
I say this from both personal
experience and from the experience of close friends and relatives. I was offered a severance package once similar to yours. I got two biweekly checks and that was it.
Two is all I expect, anyway. The severance was not generous, but is as much as anyone else's and is what the company thinks it can still afford.
The company declared Chapter 11.
Since I was a contractor, instead of paying me, I became a creditor...and one of the smaller ones at that which means there was nothing left for me after the big creditors were paid off.
Yep. I could be left with unpaid invoices. I know that. Fortunately, I don't need to worry about where the next couple of months' meals are coming from.
Sure I could
have sued, but I was a single parent with two kids and a mortgage....do I sue, or do I feed the kids?????? And even if I did sue, I wouldn't have gotten much than personal satisfaction over winning. Economically, it was wiser to accept the fact that I made a mistake and move on. If you get the severance package in a lump sum, you won't have that worry.
As for it impacting your unemployment, if you are paid on retainer, that will probably be enough to negate any unemployment anyway, and there is the fact that as a consultant you will be self-employed. The self-employed do not get unemployment.
Yes, I know that. The question was whether there is any prohibition against receiving payments on a severance package simultaneously with working as an independent contractor. The IRS has funny rules about who can be considered a contractor.
Paying the severance in biweekly installments will also raise questions with the IRS because it appears to be just a different way to pay wages.
SO, my suggestion is: get the severance in a lump sum, then enter into a consulting contract that pays a regular retainer. Keep the two separate.
That's what I'm trying to do. The issue is whether both relationships can exist simultaneously.
Al
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Follow-Ups:
- Re: Transition from employee to consultant--any gotchas?, Bonnie Granat
References:
Transition from employee to consultant--any gotchas?: From: Dick Margulis
Re: Transition from employee to consultant--any gotchas?: From: Al Geist
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