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Start-Up Businesses, Employees & Independent Contractors

Start-UP Business picMost owners of a start-up business look forward to the day they can hire somebody to help them run the business. After handling everything on your own, it can be a huge relief to have another individual who can help shoulder the burden. However, before you place the advertisement seeking help, it is important to consider the type of working relationship you want and need.

Employees
If you are interested in hiring a part-time or full-time employee, it is imperative that you obtain the proper documentation from your new hires. This includes the Form I-9 used to confirm the identity and employment authorization of individuals hired in the United States. You should also obtain a Form W-4 that will help you determine the accurate federal income tax to withhold from your employee. If you fail to obtain certain required forms, it could result in costly fines and penalties to your company or to you as the owner.

Independent Contractors
It is common for start-up companies to want to avoid all the tedious requirements that come with hiring an employee, so they use independent contractors. Unfortunately, many new companies make the mistake of treating their independent contractor just like an employee, which can lead to trouble. If an employer treats an independent contractor no different from an employee, it can create an employer/employee relationship, despite what the parties’ intended.

How can an employer maintain the independent contractor relationship? Below are a few considerations:

  • The company and the independent contractor should sign a written contract that expressly states that the relationship is one of independent contractor
  • The company should not control how the worker performs the job
  • The company should not control the business aspects of the worker’s job (this includes not providing the tools or supplies needed to perform the work)
  • The company should not provide the contractor with the same benefits as employees (such as health insurance, 401k, vacation, etc.)
  • The contractor is often hired to complete a specific project rather than having a continuing relationship
  • The contractor typically does not perform key aspects of the company’s business

If your start-up company needs assistance with determining whether an employee or independent contractor is the best way to obtain help, contact us today. The above are just a few examples of issues an attorney can help you with when starting a new company. Obtaining the right advice from the start can significantly increase the likelihood of your business being a success. Contact The Swenson Law Firm for help.

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