What Is The Difference Between Hiring An Independent Contractor And A Regular Employee?

If someone is labeled as an independent contractor when they are a true employee, multitudes of problems can arise, including employment issues, liability issues, and tax issues. It’s important to be able to identify an independent contractor versus an employee. The most important factor to consider is control. Is the employer going to be able to control this individual, not only in what they do but how they do it and when they do it? If the answer is yes, then it’s likely that the individual is an employee. If an independent contractor is providing a product or a service that your company provides, they might be considered an employee.

An example of a true independent contractor would be a CPA firm that hires someone to handle their IT services or their website. A CPA practice doesn’t provide those services, so it’s likely that there is an independent contractor relationship there.

If My Company Consists Of Friends Or Family Members, Do We Really Have To Sign Contracts Or Have An Operating Agreement?

If you want your partners or employees to continue to be friends, a formal agreement is usually the best choice. Having either an employment agreements or operating agreements reduces the likelihood of problems later on. Having those agreements and making sure they are detailed enough and layout who’s going to do what, when they’re going to do it, how they’re going to do it, how they’re going to get compensated, and what happens if the company is ever sold or there is a dispute that the parties can’t come to an agreement on. We really only see benefits to having these agreements in place.

Can I Be Held Personally Liable For My Business Debt?

If someone just has a DBA and they have not incorporated, the business and the individual are one and the same. There is no difference between them, so any liability on behalf of the business is going to be borne by the individual as well. Even if there is a separate business entity, one of the factors that comes into play is whether there was any co-mingling of assets. If the individual owner did not differentiate between himself and the company, then there is a potential for someone else to try to pierce the corporate veil and hold the individual owner responsible for any business debts.

How Do I Know When To Incorporate?

Typically, we advise clients to incorporate at the very beginning, as soon as they’re ready to actually start operating. That is the time when they need to start putting together the actual LLC or their corporate filing documents and get those things done.

How Do I Minimize My Risks As An Employer And A Business Owner?

Having policies and procedures, in writing, that are compliant with federal and Texas law will minimize risks with respect to employees. Having an attorney who is well versed in employment issues to call whenever you have questions is very wise. Before you enter into a significant agreement, have a trusted attorney review those documents and give advice. This helps an employer understand what the agreement says and does.

For more information on Independent Contractor vs. Regular Employee, a case evaluation is your next best step. Get the information and legal answers you are seeking by calling (281) 277-3066 today.