California Assembly Bill 5 - Upwork Comment

[Rene K]

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Jennifer M wrote:

my god $800 to form an LLC? lol

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Not only to form it, but to maintain it every year...

[Preston H]

About Wyoming:

I think it is $50 to form LLC, plus an annual $50, plus whatever fee you are charged by a service provider (not required, but more convenient). You can do the whole thing online conveniently through a few places for $150.

That doesn't mean everybody SHOULD form an LLC in Wyoming, but if you need an LLC, and location does not matter, it is a more affordable option than going elsewhere.

[Jennifer M]

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DJ B wrote:

This is the biggest concern for me. Employers are going to be confused by the law and default to either hiring as W-2 or simply avoiding Caifornia-based freelancers altogether.

I don't particularly mind being paid as a W-2 employee as long as I keep my independent status (i.e.; not report to an office or be subjected to annual reviews if that's not what I want). A previous commenter mentioned being paid less because taxes are taken out as a W-2 employee. This is true, but in reality you still pay those taxes when you file, as self-emplyment tax (sometimes more). So you don't really get paid less as a W-2, it's just taken out in advance of filing your taxes.

Forming a company as an LLC or S-corp can help, but in California, you pay a minimum $800 fee whether or not you did any business that year. Other states are easier to do business in that way. It's tempting to leave!

I believe that after January, the CA legislature will be meeting again to discuss AB5 and hopefully correct what's wrong with it. It originated from Uber drivers who were concerned they didn't have union representation or benefits, but they didn't think through the repercussions and how many people (who actually want to be independent) would be adversely affected.

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The problem with them taking more taxes is that in a w-2 job you almost always get ridiculous amounts of money back from the IRS and this is *bad.* You're just giving the government money and trusting they will give it back. lol You want to cut even ideally in April or at the worst owe a little bit and pay them. When I was w-2, I'd get like $4000 back from the IRS (Bad) now that I'm 1099, I can control it and basically cut even. Last year I got $300 back.

[Miriam H]

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Jennifer M wrote:

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The problem with them taking more taxes is that in a w-2 job you almost always get ridiculous amounts of money back from the IRS and this is *bad.* You're just giving the government money and trusting they will give it back. lol You want to cut even ideally in April or at the worst owe a little bit and pay them. When I was w-2, I'd get like $4000 back from the IRS (Bad) now that I'm 1099, I can control it and basically cut even. Last year I got $300 back.

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That actually sounds like a withholding issue - not a W-2 issue.   

[Jennifer M]

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Miriam H wrote:

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That actually sounds like a withholding issue - not a W-2 issue.   

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yeah, I know you can claim like 5 dependents lol. But I always just claimed 1 like normal and would get thousands back.It started when I owned a home rather than renting.

[Christine A]

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DJ B wrote:

This is the biggest concern for me. Employers are going to be confused by the law and default to either hiring as W-2 or simply avoiding Caifornia-based freelancers altogether.

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Yes, I do think that this is true, unfortunately. If I were a freelancer living in California, my bags would already be packed.

[Mary W]

Could someone based in California please PM the email you received from Upwork?  I would like to send it to a client ASAP.

[Preston H]

Or if a moderator could post a link to it?

Does not sound like a private thing. Sounds like something that would be useful to anyone working with California-based Upwork clients or freelancers.

As far as people leaving California goes... I read an article today saying that with the latest census data, California is going to lose at least one Congressional seat due to population loss.

[Preston H]

Well, this is interesting... Some major companies are simply not going to comply with AB5...

Uber, Lyft, Postmates, Facebook and others are apparently going to skip this one...

[Christine A]

Interesting. What's the penalty for non-compliance? Presumably the bigger companies can afford it, or can afford to go to court.