How to Avoid Incorrectly Treating a Worker as an Independent Contractor.

The penalties for incorrectly treating a worker as an independent contractor are significant. Consider these factors before deciding whether to treat a worker as a contractor.

Many business owners want to use independent contractors to complete certain tasks rather than hiring employees. There are advantages to hiring an independent contractor. First, instead of paying significant overhead costs for an employee – including taxes, benefits and insurance – you pay a contractor only for the end result. Second, hiring a contractor involves a smaller administrative workload. An owner need only file IRS Form MISC-1099 as opposed to dealing with the numerous forms and deductions required for a regular employee. It is important not to treat your contractor like an employee. The penalties for incorrectly labeling a worker as a contractor can be costly. An owner is responsible for the employer taxes for failure to withhold as well as a portion of the employee’s taxes that were not paid. You must file MISC-1099 for each contractor that you paid in excess of $600.00 during the year. Failure to file could double your percentage of the employee taxes you may owe should you determine that your contractor was actually an employee.

If the answer is "Yes" to the following questions the worker is probably an employee:

1. Does the owner provide instructions to the worker about when, where and how he or she is to perform the work?
2. Does the owner provide training to the worker?
3. Are the services provided by the worker integrated into the owner’s business operations?
4. Must the services be rendered personally by the worker?
5. Does the owner hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the owner and the worker?
7. Does the owner set the work hours and schedule?
8. Does the worker devote substantially full time to the business of the owner?
9. Is the work performed on the owner’s premises?
10. Is the worker required to perform the services in an order or sequence set by the owner?
11. Is the worker required to submit oral or written reports to the owner?
12. Is the worker paid by the hour, week or month?
13. Does the owner have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship any time he or she wishes without incurring liability to the owner?
15. Does the owner pay the business or traveling expenses of the worker?

Have you considered a human resource audit to help you avoid incorrectly treating a worker as an independent contractor?

How to Preserve Corporate Status and Maintain Limited Liability: Follow simple steps to preserve your corporate status and maintain limited liability.

If you are careless about maintaining the separation between the corporation and yourself, you can jeopardize your freedom from personal liability or certain tax benefits – the main reasons to incorporate. It is rare for a judge to disregard a corporation and impose personal liability on a shareholder, but it does happen. When it does it is almost always in a small corporation where the owner has allowed the line between the corporation and the owner to disappear.

Following these simple steps help preserve your corporate status and maintain limited liability:

1) Put adequate capital into your corporation. This means putting in enough money and other assets to meet your foreseeable business requirements. The amount will vary from business to business. Get advice from someone in that business or an accountant.

2) Insure against obvious risks. Is there a substantial risk to customers or others being injured because of your business? It is wise to obtain a reasonable amount of coverage.

3) Observe corporate formalities. Issue stock certificates to shareholders before doing business. Keep a corporate record book with Articles of Incorporation, stock records, bylaws and minutes of shareholder and director meetings. Hold annual meetings each year to elect directors and officers.

4) Separate your personal finances from the corporation’s. Your corporation needs its own bank account. Don’t use the corporate bank account to pay your personal expenses.

5) Use the correct corporate name. Use your full corporate name in all your business dealings. Put the corporate name on your stationery, business cards, phone book listings and on your Web site. Be careful not to use an abbreviated version of your corporate name unless you have filed for a fictitious name with the Secretary of State.

6) Sign documents as a corporate officer. Sign your name – "John Doe, President" – along with the name of your corporation, rather than sign just as an individual. This makes it clear you are acting as the agent for a corporation and not as an individual. If you must personally guarantee an obligation you should still follow this advice. It provides evidence that the corporation and you are separate legal entities.

7) Assign existing business to the corporation. If you incorporate an existing business (such as a sole proprietorship or a partnership) the old business may have contracts. It’s usually a good idea to formally transfer these contracts to the corporation.

Who Should Conduct an Internal Investigation of Harassment: Considerations

Business owners often wonder who should conduct internal investigations of harassment. Here are some considerations:

Internal Investigators

1) Management. A direct supervisor may be less likely to be impartial. If a manager is chosen outside the direct line of supervision, that person should be of higher rank than the accused. A person the same rank may appear biased.

2) Attorney. The corporate attorney is often chosen because the company can invoke the attorney-client privilege. An attorney investigator will usually be outside the line of supervision of the accused and is often familar with laws and company policies. A corporate attorney, however, may also appear biased in certain situations.

3) Human Resource Department. A human resource manager is often outside the chain of supervision and familar with applicable laws and company policies. This person may also be trained in investigation techniques. In certain situations, however, this person may appear biased.

Outside Investigators

Outside investigators may be necessary to ensure independence and also may have the necessary training and experience to conduct such an investigation. If you have a small business, an outside investigator may be critically important in order to avoid the perception of bias. You must make sure the outside investigator becomes familar with your company policies.

Iowa Registered Agent Services for Businesses:

Sullivan & Ward, P.C. provides Iowa registered agent services for your business. Corporations and limited liability companies are required to appoint a registered agent and office within Iowa to receive service of process. We serve as your business entity’s Iowa designee to accept official documents on your behalf such as original notices for lawsuits and communications from various Iowa state agencies. If your business is a corporation, our service also includes preparation of the biennial report filed with the Iowa Secretary of State office.

You may see other organizations and businesses on the Internet, in magazines or the newspapers that provide registered agent services. Many of those organizations are unable to provide you with legal advice and may not fully understand the implications of Iowa law. Our law firm is located in the State of Iowa and we provide these registered agent services only in the State of Iowa.

Click here to find out more about Sullivan & Ward’s registered agent services for businesses.

Des Moines Patent Lawyer Files RICO Lawsuit to Fight Alleged eBay Fraud

Des Moines patent lawyer Brett Trout recently filed a federal lawsuit alleging RICO violations against a woman Trout says is defrauding eBay users. Trout purchased a car from the woman for $22,000 on eBay. He received the car but the title was never delivered even after months of phone calls and threats of litigation. To support his RICO claims, Trout alleges the woman did not deliver certain items to winners of her other eBay auctions including a boat. RICO claims are most often used against criminal conspiracies such as organized crime. While the approach may be novel Trout says the claim fits in this situation. It may have worked too as he is currently in negotiations to obtain the title and recoup certain costs he incurred over the last several months. Trout says, "I just want to drive my car, right now it is the world’s largest door stop."

Brett Trout is the author of Internet Laws Affecting Your Company. For more information you can visit his Web site at www.bretttrout.com

Growing Companies Face Exposure to Employee Lawsuits: Des Moines Business Record

The Des Moines Business Record recently featured business lawyer Rush Nigut of Sullivan & Ward, P.C. in an article concerning the exposure of growing companies to employee lawsuits. Click here to read the article on exposure to employee lawsuits.

Avoiding Sexual Harassment Claims in Iowa: Practical Advice

Employers have an obligation to prevent sexual and other forms of harassment in the workplace. Some ways to avoid harassment claims include the following:

  • Have a written policy against harassment which should include an anti-retaliation provision for those employees who report harassment.
  • Provide and communicate in writing multiple channels for your complaint procedure. Employees should be able to report harassment to more than one person within the company. The complaint process should be clearly defined in your employment manual.
  • Make sure you train supervisors each year and require supervisors to report harassing conduct.
  • Once notified of harassing conduct – take immediate action to investigate.

Click here for more information on avoiding sexual harassment claims in Iowa.

Small Business Human Resource Audits: How to avoid employee lawsuits

Are your employment policies and practices up-to-date? Every employer is at risk for an employment-related lawsuit. Every lawsuit is potentially devastating to your business, given the high costs of defending a suit, negative publicity, employee time spent in litigation, and ripple effect of employee complaints. You can significantly cut down your exposure to an employment-related lawsuit by having an attorney review your company employment policies and procedures from the interview to the termination stage. Well-drafted employment policies and handbooks, detailed recordkeeping, and good human resource practices are the best way to avoid complaints and employment-related lawsuits. Click here for more about small business human resources audits.

Are you looking to incorporate your Iowa small business? My first word of advice is to speak with an accountant to determine which form of business best suits your tax situation. Your choices likely include the "S" corporation, "C" corporation or you could choose to form a limited liability company.

Some people are inclined to choose an online service to incorporate your business. Many of these companies hook you in with a low cost advertisement for the incorporation but the other necessary documentation is offered for a significantly higher cost. Further, these organizations are often unaware of specific legal situations and local laws.

It is wise to choose a business lawyer to incorporate your business. You want to make sure your lawyer practices primarily in business law. Choosing a lawyer that is not familar with business law may have serious consequences and may increase the costs because the lawyer may learn on your dime. By analogy, you would not want a plastic surgeon operating on your heart. Find out how to affordably incorporate or form a limited liability company for your business. Click here for more on small business incorporation.