Designated Employee

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electrofelon said:
When caught for what?
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If they are caught, they probably have some sort of situation come up where someone feels they been cheated in some way, and it is discovered that maybe there isn't exactly a legitimate ownership involved but rather a workaround for taxes, insurance, etc.

Typically an owner needs to buy in to any kind of ownership as well as be involved in making operational decisions and not be treated like an employee typically is treated. If injured on the job, they possibly need their own healthcare coverage unless the company has set up something that covers the owners as well, and that could be a somewhat common example of where not doing it correctly breaks down and gets one into trouble.
 
kwired said:
If they are caught, they probably have some sort of situation come up where someone feels they been cheated in some way, and it is discovered that maybe there isn't exactly a legitimate ownership involved but rather a workaround for taxes, insurance, etc.

Typically an owner needs to buy in to any kind of ownership as well as be involved in making operational decisions and not be treated like an employee typically is treated. If injured on the job, they possibly need their own healthcare coverage unless the company has set up something that covers the owners as well, and that could be a somewhat common example of where not doing it correctly breaks down and gets one into trouble.
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No, there is no requirement to have "operation decisions" or any other such thing. That is just not the way it works. For an LLC, profit decision making and control can all be independent and different. I can bring someone into my LLC for a 3-week job and then get rid of them if I want, and not have had any payroll or WC responsibilities. I am not saying that is the best arrangement in all situations, but there is nothing "shady" or risky about it whatsoever.
 
electrofelon said:
No, there is no requirement to have "operation decisions" or any other such thing. That is just not the way it works. For an LLC, profit decision making and control can all be independent and different. I can bring someone into my LLC for a 3-week job and then get rid of them if I want, and not have had any payroll or WC responsibilities. I am not saying that is the best arrangement in all situations, but there is nothing "shady" or risky about it whatsoever.
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For a corporation or an LLC wouldn't you need to "reorganize" the ownership every time you do such a thing? Then "reorganize" it again when that person leaves?

Seems simpler to pay someone under a 1099 and treat them as a subcontractor for just a three week job. If they don't have their own insurance you may still need workers comp on them. If they are not their own corp or LLC then they will need to file sch C when they do their income taxes, make their own income tax estimated payments when necessary and pay self employment tax instead of you running payroll taxes on them.

I think the number one reason people do this is to avoid payroll taxes and worker's compensation.

There is a difference between being a manager and being an owner/part owner. If you have little to no investment into the business I suppose you could legally still be a part owner. I would certainly hope outside of passing it on to a family member or other similar situations that the major owner still has pretty good control of the business operations though.
 
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