1. There are three basic ways to rent oneself out:
- Be a full-time employee of a service provider;
- Be contracted to a service provider on an as-needed basis;
- Be totally independent.
(There is a lot of overlap in the two second choices as one can be independent but subcontract to the service provider when they need one’s skills to fill a job. In that case, instead of selling oneself to the client, one has to sell oneself to the agency.)
From my experience, there is no “right” way to do this, with each person picking the way that is the best emotional fit. I was a wholly owned employee for 21 years and I was very comfortable with it. Somebody else got to worry about making sales calls and balancing the books. I got a slightly lower salary, but I got paid vacations, health, 401k, etc. and when I was between clients for a week or three, I still got paid. A friend of mine simply cannot work for another person, so he has been an independent throughout the 25 years I’ve known him. He can take home every dime he bills; he then turns around and spends a lot of it to buy insurance (including liability insurance, security bonds if demanded, etc.) at higher prices. He can take a vacation any time he can arrange it with a client, but the vacations are unpaid–and in lean times the clients arrange for him to take unpaid vacations. I’ve known several guys in the middle group, as well. Typically, their paycheck has been a couple bucks higher than mine, but their health programs have been more expensive to them, their 401k programs are either non-existent (they can still use IRAs, of course), or of lower quality than mine, and their “vacations” are taken when the agency can’t find work for them (and are unpaid).
Any statement regarding which method is “best” is really a statement regarding the comfort or enthusiasm the speaker has for that particular method.
2. The only way to know how much to charge is to find out what the client is willing to pay. That makes it rough for a beginner. This is where networking at professional associations and similar groups comes in handy, to find out what the going rates are. (No one is honest, since they don’t want to reveal their billing rates, but they will generally provide a ballpark.) Running the ads for your region will (if you read hundreds of them) give an idea of what customers are paying. Most ads are either really vague or mildly misleading, but after reading lots of them, you can begin to get a feel for the market. (Annually, trade journals and the US Bureau of Labor statistics also publish lists of median or ranges of salaries for different occupations that can provide a decent idea of what the market currently bears.)
As to hourly vs fixed price: If you know exactly what needs to be done (as in, you have done the exact job on multiple occasions), then you can figure a fixed price based on how much you need to recoup vs the time it will take you to do the work. Any system that is being designed for the first time cannot legitimately be done for a fixed price. Anyone who attempts to give a fixed price on an unknown design project is either going to charge excessively to cover the slop (and I don’t like giving my money to thieves) or they are going in with no clue how bad it will be (and I don’t want fools designing my systems). Then, of course, there was the project that was let out at my biggest client (over my protest) that was seriously overbilled, then handed to rookies (to keep down the contractor’s costs) and badly written, so they gave money to thieves in order to have fools build the system.
I’m in business programming, not games or similar tech, but as an example of the differences: My outfit used to do a lot of fixed bid projects installing upgrades on a payroll system. After the first two upgrades, we had enough experience, both with the software and with the vendor, that we could look at a new release and know just how long it would take to install it. It was never plug and play (which is why the companies were willing to bid it out), but the software was consistent from release to release. On the other hand, we also did conversion work from in-house systems to that product. We did all those on a time-and-material basis because we could never tell before we started the project whether the in-house system had enough information to allow a clean conversion, we could not tell from a couple of sales calls whether the users had any clue how their own system worked, and we could not determine how many in-house people were going to strive mightily to sabotage the project because they disagreed with the decision to do it.
3. I don’t know how it is in your industry, but in the business and back-office trade, incorporation has been a requirement for nearly 20 years. Whether it is “worth” the hassle would depend on how badly you want work and whether the same requirement is true in your industry.
4. If you are smart enough to run a business, you can do the taxes for yourself (especially with any number of software products out there for less than $100), however, the lack of good accounting knowledge and practices is a leading cause of small business failure. You might want to talk around and find a decent CPA. Similarly, you can shop for insurance on your own, but you can generally get better rates if you buy as part of a group–often offered through trade groups and professional associations. (My boss used to go it alone on the insurance, but his father was in the business and the two of them were able to find some really good deals.)
5. If you work on-site, showing up at their office establishes “when” you worked. For off-site labor, I can’t help with that aspect.