When to Hire and When to Contract

In our last blog, we reviewed the differences between an independent contractor and a standard File employee taxesemployee.  In this blog you will learn which type best suits your needs.

You’re a small business owner and you’ve become quite successful. You have a small staff that is already working full-or part-time, but you’ve got some small specialized tasks that need accomplished. Your secretary is available to finish what needs to be done, but you also realize she is not particularly creative. At this point, you know it isn’t exactly fiscally responsible to hire another employee, but you need some more help.

It sounds like you may need an independent contractor.  Basically, an independent contractor comes into your company when you have a finite amount of work that needs to be finished.  You may also have budget constraints that make hiring another employee impossible.  With an IC, they are typically paid by the job and on a short term basis, so most of the time you don’t pay high insurance premiums for them.

Another advantage to the IC is that they typically supply their own tools.  There’s very little need to supply office space, supplies, or utilities.  Also, an IC is responsible for his own tax liability thus alleviating the necessity of filing extensive forms with the IRS.  Essentially, an IC is brought into a company when there is specialized work that needs to be done and the amount of work does not justify bringing on another employee.

An employee is brought on when the workload has become too much for the company, the budget allows for it, and the amount of work will be ongoing.  If you expect the boom in business to be temporary, then a seasonal employee sounds like it may be a good fit.  However, if you have some press releases that need written, or a new blurb written for your advertisements, an independent contractor is most likely going to be the right fit for your business.

As always, consult with an accountant or a tax attorney before making any tax decisions for your company.  For any independent contractors in need of 1099 assistance, please contact us!

Just as for your employees you need to report salary paid on Form W-2, for contractors you will need to file form 1099-MISC to report payments made during the year. Use OnlineFileTaxes.com for all your 1099, 1098, or W-2 filing needs.

Resources:
Forbes
IRS
Legalzoom
SBA