As your business grows, you realize there are only so many hours in the day, and those 24 hours simply aren’t enough for everything that needs to get done: producing your product or service, marketing the business, making sure there is enough money to keep going, growing yourself as a leader and entrepreneur, etc., etc. At some point you simply need more help.
But taking on a regular payroll expense seems daunting and payroll taxes sound confusing and expensive. (After all, if you hire someone at $10/hr, it actually costs the business more than $10/hr…thanks Uncle Sam!) Many small (and some not so small) businesses in this situation decide to hire independent contractors instead. But is that truly the way to grow your business, or is it a trap waiting to spring?
Classifying Workers as Independent Contractors Can Save the Business Money
There are several benefits to hiring people as independent contractors instead of employees:
Misclassifying Workers as Independent Contractors Can be a Costly Mistake
At this point, hiring an independent contractor may seem like a no-brainer, but you can’t make everyone an independent contractor just to save money. The IRS (or several other government agencies) can determine that the business misclassified a worker as an independent contractor when legally, the person should have been classified an employee. In that situation, the business can face significant penalties:
Small businesses simply cannot afford to make a mistake when it comes to deciding whether a worker is an independent contractor or an employee. We hear from small business owners all the time who assume that they can get away with misclassifying workers because they are “just” a small business; however, being a small business is not a defense.
If you have any questions about how your workers are classified, schedule your initial consultation today or watch our webinar on this very topic: