Going independent: contracting basics

← All resources · 9 min read · Updated October 2026

Contract work can bridge the gap between full-time roles, or become the next career itself. Here is what experienced professionals usually wish they had known before their first engagement.

First, check you are allowed to

The three common setups

• W-2 contract. You are an employee of a staffing firm or the client for the length of the project. Taxes are withheld for you and some firms offer benefits. The rate is lower, but the paperwork is simpler.
• 1099 (independent contractor). You invoice the client directly, pay your own taxes and buy your own benefits. Rates are higher to cover that.
• Corp-to-corp (C2C). Your own company (often an LLC) contracts with the client's company. Common with larger clients and staffing agencies.

Setting your rate

A common starting point: take the full-time salary you would expect, divide by 2,080 working hours, then multiply by 1.5 to 2 for 1099 work. That covers self-employment tax, health insurance, retirement savings, unpaid time between projects, and the hours you spend on sales and admin.

For example, a $150,000 salary is about $72 an hour, so a 1099 rate of roughly $110–$145 an hour. Fixed-price projects work well when the scope is clear; hourly or daily rates are safer when it isn't.

Sole proprietor or LLC?

• Sole proprietor is the default: you can start with your own name and Social Security number (or get a free EIN from the IRS so you don't hand out your SSN).
• A single-member LLC separates business and personal liability, looks more established to some clients and is required for most C2C work. It costs a state filing fee and, in some states, an annual fee.
• Either way, open a separate bank account for business income and expenses. It makes taxes far easier.

Taxes in plain language

• Self-employment tax (Social Security and Medicare) is about 15.3% on net earnings, on top of income tax.
• Nobody withholds for you, so set aside 25–35% of each payment and pay quarterly estimated taxes (usually due in April, June, September and January).
• Track business expenses: equipment, software, a share of internet and phone, training and professional insurance.
• A one-hour session with a CPA in your first year is money well spent.

A simple contract

Even small projects need a written agreement. At a minimum it should cover scope and deliverables, timeline, rate and payment terms (net 15 or net 30), who owns the work, confidentiality, how either side can end it, and how changes are handled. Our statement of work template is a plain-language starting point.

Protect yourself

• Ask for a deposit (often 25–50%) or milestone payments on fixed-price work.
• Consider professional liability (E&O) insurance, which some clients require.
• Check any non-compete or non-solicit terms from your last employer before working for its clients or competitors.

Finding your first client

1. Start with people who know your work. Former managers, colleagues at other companies and vendors you worked with are the most common source of first contracts.
2. Name a specific offer. "I help mid-size teams move workloads to Kubernetes in 8–12 weeks" is easier to refer than "I do DevOps".
3. Use the RestartHub project board. Companies post contract projects for members; complete your profile so they can find you in the talent pool.
4. Team up. Several members together can take on projects none could do alone.

General information only, not tax or legal advice.