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SECTOR REPORT | April 17, 2013

Top Franchises 2013

The 2013 Guide to Today’s Top Franchises takes a close look at the data compiled as part of Franchise Business Review's annual franchisee satisfaction awards. We explore what trends we're seeing in 2013, what concepts and franchise models are most popular, what’s involved from an investment and financing standpoint, and how franchisee satisfaction has fared in the past year.
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NEWS | April 16, 2013

First Non-Medical In-Home Care Franchise System to Launch Telehealth Monitoring

FirstLight HomeCare now offering telehealth technology to expand services for clients, families and to further enhance industry-leading Readmission Rescue Program.
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ARTICLE | April 15, 2013

On the Job with Terry May

May’s first paying job was at age 16, in the small garage in Roberts, Wisconsin. Then he honed his skills as a jet engine mechanic in the U.S. Air Force for four years. When he came out of the military, he went back into automotive repair. After 40 years in the business, May said he has no intention of slowing down. He is now shop foreman for Honest-1 Auto Care in Cottage Grove.
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ASK FBR | March 25, 2013

Where are you in your franchise search?

Franchise Business Review wants to know what stage you're at in finding the right franchise for you: still in the research phase, having conversations, opening your first location soon... FBR encourages you, no matter the stage, to answer this simple question - where are you in your franchise search? (Click here to share)
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Home > Blogs

Should You Hire Employees or Independent Contractors?

by Warren Jones

Among the many considerations to weigh when shopping for a franchise is whether you will need to hire workers to provide services to the business. Further, depending on the franchise requirements, you may be required to hire a specific classification of worker, namely, employees or independent contractors.

As a business owner, it is essential that you understand the difference between the two for a variety of reasons, each of which can significantly impact your bottom line.

The IRS sets forth rules to help you determine the correct classification of anyone you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers’ paychecks, and what tax documents you need to file.

Generally, hiring an employee means you must withhold and pay income taxes, Social Security and Medicare taxes, and unemployment tax on those wages. With an independent contractor, you do not have to withhold or pay any taxes on their earnings.

In determining whether a worker is an independent contractor or an employee, the IRS begins with examining various aspects of control or direction of the work in one of three general categories: behavioral control; financial control; and type of relationship.

If you misclassify workers as independent contractors, you can end up with substantial tax bills. Additionally, you can face interest and penalties for failing to pay employment taxes and for failing to file required tax forms. To learn more about this topic, go to www.IRS.gov, then select the Small Business link.

Another important aspect to consider when deciding what type of worker to hire relates to liability while they are working on any aspect of your business. This includes work-related injuries, injury to another person (such as in a motor vehicle accident), property damage, or theft.

If you have employees, you are required to pay worker’s compensation and other insurances to cover your liability. However, while you are typically not responsible for paying for insurance to cover an independent contractor, you are responsible for making certain that they carry their own insurance.

If a contractor does not have insurance and is injured or causes injury to another while carrying out work related to your business, you can be held liable, regardless of your relationship to the worker (employee or independent contractor). You can overcome that obstacle by paying worker’s compensation and/or other types of insurance for your independent contractors.

Consult with your CPA and/or attorney to ensure you understand and abide by the various guidelines with regard to any workers you hire.

Warren Jones, CPA
CFO
Bark Busters USA

Learn more about Bark Busters at topfranchises.franchisebusinessreview.com.

 

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Posted by shiela bigg on 01:16:51 AM on August 26, 2011

Job growth in the U.S. has not been recovering very quickly. Unemployed individuals are turning to alternative employment options. Independent contractors are being employed more and more often to fill jobs that employees used to do. Understanding the difference between independent contractor and employee could have huge tax consequences. Article source: Making the distinction; employee vs independent contractor IRS. From a legal standpoint, whether an individual is an independent contractor or an employee has tax ramifications. The Internal Revenue Service has guidelines that are intended to clarify the difference, partly to avoid confusion and partly to guard against illegal practices such as listing employees as independents.

Posted by shiela bigg on 01:14:19 AM on August 26, 2011

For individuals, the differences in working as an employee and working as an independent contractor mostly involve paperwork and personal responsibility. When you are an employee, the employer is responsible for paying part of your payroll taxes. An employer also has more say about work hours, work process and is responsible for providing the tools to get a job done. An independent contractor is responsible for paying all of their employment taxes and has more individual control over their work process.