One of the biggest questions facing a small business owner is whether they should hire full time employees or individual contractors. There are pros and cons to both routes and the decision could greatly affect the business as well as the personal finances of the business owner. When deciding whether to hire full time employees or individual contractors, there are several things that the business owner should keep in mind. By carefully considering the decision before committing one way or the other, the owner of the limo company may save themselves a great deal of trouble in the future.
The most important thing to consider when deciding whether to hire full time employees or independent contractors is how the federal and state taxes will be paid. If the individuals are hired as full time employees, the business owner is responsible for paying the payroll taxes associated with the employees.
Failure to pay these payroll taxes can result in audits and fines levied by the IRS. These taxes cannot be eliminated by bankruptcy and if the business is dissolved, the business owner is held personally responsible for the payment of the taxes. The business owner must also be careful not to classify the employees as independent contractors if they do not meet certain criteria, or the business owner may be responsible for paying taxes with added penalties for the length of time that the employee had been working for them.
Independent contractors must meet certain criteria, such as ownership or leasing of the vehicle that they drive to pick up and transport customers.
If the vehicles are owned by the business owner, then the chauffeurs are more likely to be classified as employees than independent contractors. Independent contractors that are leasing the limos from the business owners must have a lease contract on file with the business to ensure that they will not be classified as employees. These leases mean that the contractor must pay a fee to the business owner for operating the limousine and that all the money that they make from the operation of the limousine belongs to them.
Classifying the individual as an independent contractor can be tricky, which is why many business owners decide to just hire the individuals as employees. Both routes are complicated and have obvious and not so obvious benefits. Whether the individuals that are trusted with the customers are considered employees or independent contractors, they are the face of the company to the customers and should conduct themselves as such.
