100th Post Share! Offline Independent Contractor Documents

After consideration I have removed the documents. I do not wish to contribute to anyone's engagement in any form of legalities as MB has described below. I took the risk of hiring on my sales reps as contractors and still continue to have them on working for me. It was a long road making sure all of them got their business licenses, etc. and there are several variables involved that pose a venerability to you and your business. I have taken the risk and it has paid off but other might not be as lucky.

Anyone who follows this guys advice, PLEASE DO YOUR DUE DILIGENCE AND SPEAK WITH A LAWYER THAT SPECIALIZES IN THIS AREA OF LAW. Having someone sign 1099 forms does NOT mean they are truly 1099. If they work in YOUR OFFICE, using YOUR EQUIPMENT, using YOUR PITCH, or you have the AUTHORITY TO TELL THEM HOW TO DO THE JOB, then they are NOT 1099 contractors. Basically if the sales rep is treated like an employee, chances are THEY WILL BE CONSIDERED AS EMPLOYEES BY THE LABOR BOARD. The labor board does not give one shit if you made them sign consent forms or 1099 agreement forms. All it takes is ONE bad sales rep to contact the labor board and you will be facing MASSIVE CHARGES and up to TRIPLE DAMAGES on EACH false 1099 contractor you hired. Keep in mind, even if they are commission only, it DOES NOT mean they are 1099 contractors. I have been personally burned by this in the early stages of my business. I heard from people that 1099 was the cheap way to go and it burned me HARD. Sorry for all the caps locks, but I am very passionate about this topic.

@MB Thanks I 100% agree. I do not recommend anyone using these docs in place of professional legal documents but if you do not have the money and need to cover your ass then they are better than nothing. Following what you have said if you anyone is wondering what is the difference between a 1099 and a W2 employee check here to see both defined by the IRS themselves. http://www.irs.gov/businesses/small/article/0,,id=99921,00.html There is a very fine line between the two.

Also one thing that I am currently doing that was recommended to me by my accountant was to have them pay rent if they are working out of your office. Do not pay for anything for them.

WebOracle said:

@MB Thanks I 100% agree. I do not recommend anyone using these docs in place of professional legal documents but if you do not have the money and need to cover your ass then they are better than nothing. Following what you have said if you anyone is wondering what is the difference between a 1099 and a W2 employee check here to see both defined by the IRS themselves. http://www.irs.gov/businesses/small/article/0,,id=99921,00.html There is a very fine line between the two.

Also one thing that I am currently doing that was recommended to me by my accountant was to have them pay rent if they are working out of your office. Do not pay for anything for them.

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We hired a cheap lawyer to draw up our 1099 documents and thats what got us in trouble. We thought we were in the clear because a lawyer had drawn it up. After the whole fiasco, we got legal counsel from a very high end lawyer and he basically laughed at us. To even have a slight chance of winning a 1099 case if confronted with one is basically you have to prove that

said contractor signed 1099 documents
each of your sales rep will need his own business license
their own business bank account
every time you want to pay them, they have to INVOICE your company
you cannot tell them how to do their job (pitch, etc)
they must have their own equipment (we rented our cubicles @$10 per week to them and it didn't matter one shit to labor board)
plus a million other things to worry about.

at the end of the day, it was much easier to w-2. it was something like 9% more per employee and more paperwork for our cpa but thats worth the peace of mind.

I'm telling you, all it takes is ONE disgruntled employee to fuck your whole shit up. if you are ready to take on the labor boards and are willing to drop five figures to have a tiny tiny chance of winning, go ahead but think hard on it.

goodluck,

MB

I can definitely see where you are coming from. Having independent contractors was pretty much the only choice that I had in the beginning when I wanted to expand my biz. But now that I am making a ton more money I am highly considering protecting myself a lot more by making the conversion to W-2 employees. I highly value your opinion and experience MB and appreciate the words of wisdom. I have already run into a disgruntled employee that has cost me thousands and do not want to run into another. I am just wondering how I would justify the transition. What would you recommend hiring canvassers on as?

WebOracle said:

What would you recommend hiring canvassers on as?

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It would probably save you stress and thousands in the future if you had a CPA and a attorney to help keep you from trouble.

I have a cpa. Not ready to pay retainer fees for an attorney just yet though. I had some dealings with the taxation department today. Things seem to be way more lax than people claim. Also another thing is that if you live in the U.S then the state and government are not really out to bust the chops of small businesses or any business for that matter. They want and need more businesses out there to employ the 12 million that are unemployed.

Specifically you should have a tax attorney review what you are considering doing.
My feeling is to stay out of the tax and legal system. If there is a legality that some government employee finds you violated you will pay 10 times the amount you would pay to have the review done.