Comparison: employee vs self-employed
Opening a company is often used by immigrants, especially when there is no work authorization yet. For many, it is the only way to work as a contractor. Owning a business does not grant work authorization, but it allows income transparency and avoids cash work.
Over time, most people obtain work authorization, and a choice appears: work as an employee or as a self-employed contractor.
This comparison assumes equal conditions within the same company, focusing strictly on the financial difference.
Employee - pros:
✔️ Employee benefits (phone, discounts, etc.)
✔️ Retirement plans such as 401(k)
✔️ Paid time off and sick leave (PTO)
✔️ Health insurance provided by employer
✔️ Taxes withheld by employer
✔️ Eligibility for unemployment benefits
Employee - cons:
❌ No additional tax optimization options
Self-employed - pros:
✔️ Ability to deduct business expenses (equipment, internet, vehicle, insurance, education, etc.)
✔️ Potential tax savings
✔️ Welfare programs may apply a 50% income deduction for benefit calculations
✔️ Self-employed workers are cheaper for employers
Self-employed - cons:
❌ No employee benefits
❌ No paid vacations or sick leave
❌ Health insurance paid independently
❌ Self-managed tax payments
❌ Additional business expenses
❌ Mortgage usually requires 2 years of business income
In numbers:
With annual income of $120,000:
Employee: $28,056 in taxes + $9,180 paid by employer
Self-employed: $30,341 in taxes
Difference: approximately −$2,300 per year.
However, choosing S-Corp taxation within an LLC may reduce taxes to about $24,000, resulting in +$4,000 compared to employment.
Key considerations:
1) Additional business costs - accounting, payroll, annual fees (~$2,000/year). You still remain ahead.
2) Expense deductions - with 20% expenses, tax savings may reach $5,000.
3) Self-employed workers cost less for employers, so compensation should be at least 10-20% higher.
So which is better?
The choice depends on priorities: stability vs flexibility, simplicity vs optimization.
My opinion: being self-employed is way better
Disclaimer: The information provided here is for general informational purposes only and does not constitute legal advice. Immigration rules may change. For guidance on your specific situation, always consult official sources or a qualified attorney.
