Growing a Company

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JOHNEO99

JOHNEO99

Senior Member
Location
Northern Illinois
Hi All

I have been a one man shop for 3 years now and want to hire a helper or to due to being back logged.

My question is should I stay a sole proprietor and pay a helper and then 1099 him at the end of the year or is there a better way to go about setting up a payroll?

Any other info on starting/growing an electrical contracting company would be appreciated.


Thanks in advance.

John
 
JOHNEO99 said:
Hi All
I have been a one man shop for 3 years now and want to hire a helper or to due to being back logged.
My question is should I stay a sole proprietor and pay a helper and then 1099 him at the end of the year or is there a better way to go about setting up a payroll?
Any other info on starting/growing an electrical contracting company would be appreciated.
Thanks in advance.
John
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I believe there may be a legal issue (I know it's done all the time) about having someone working for you full time and not putting them on the payroll. I believe IRS can get you, if you get audited,on this. I believe this is really a question for a CPA.
 
you will also need to cover an employee with workers comp ins., not sure if thats possible with a 1099 situation. i think 1099 would be considered a sub contractor. good luck if your new helper gets hurt on your job and he's not covered.
 
Here's my post from the duplicate thread:

It is usually not legal to 1099 a helper. In MA it definitely is not. A helper must be an employee and you will need to take payroll taxes out. You will need workers comp. Payroll taxes are no big deal. A payroll service can do it or your accountant should be able to advise you. You certainly can stay a sole proprietor. There's no reason not to.

edit: there is a duplicate thread going on, fwiw
 
mgmelec said:
you will also need to cover an employee with workers comp ins., not sure if thats possible with a 1099 situation. i think 1099 would be considered a sub contractor. good luck if your new helper gets hurt on your job and he's not covered.
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I have the insurance part covered.

You guys know of any publications or articles on this stuff?

j
 
j_erickson said:
Here's my post from the duplicate thread:

It is usually not legal to 1099 a helper. In MA it definitely is not. A helper must be an employee and you will need to take payroll taxes out. You will need workers comp. Payroll taxes are no big deal. A payroll service can do it or your accountant should be able to advise you. You certainly can stay a sole proprietor. There's no reason not to.

edit: there is a duplicate thread going on, fwiw
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I suppose he would have to be a sub. Would I have to make an agreement for every job?

j

Does this make sense or should I just do the payroll with taking taxes and s.s. out for the helper?
 
JOHNEO99 said:
I suppose he would have to be a sub. Would I have to make an agreement for every job?
j
Does this make sense or should I just do the payroll with taking taxes and s.s. out for the helper?
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If he were a sub he would have to have his business, blah blah blah. Take out the tax and save yourself headaches or talk to an accountant.
 
JOHNEO99 said:
I suppose he would have to be a sub. Would I have to make an agreement for every job?

j

Does this make sense or should I just do the payroll with taking taxes and s.s. out for the helper?
Click to expand...

Make him an employee. If you're going to grow, you'll need to figure out the paperwork for payroll and taxes eventually. An "apprentice electrician" can not get liability insurance (at least here in MA). Your only way around it might be to contract him as a laborer. Then he's not an apprentice or a helper. But it's also not legal to sub someone if you tell him when and where to be 5 days a week. Anything other than just hiring him as an employee is trying to circumvent some requirement. I know carpenters and others who do this, but they admit (to me) that they are trying to beat the system. Insurance and Taxes.
 
It is very difficult to have a guy be a sub who is his own EC. It has been tried but so much paperwork to prove to the state and feds and ins company. There are a lot of rules, that said it is also hard to find a guy who can be part time at first if your don't have enough work for him to make 40 hrs. I had this dilemma when I was growing because you have to grow at a rate you can handle. Here is what I was able to pull off. I use to work for a guy who is an EC and we are still great friends, I even send him work from time to time and vice versa, when I was growing I asked for his advice, he told me to let him know when I needed a helper he would provide the helper for a $ amount per hour and take care of all the paperwork as if he was paying him. Much like a temp service does, only I was getting a qualified guy. worked great till I had enough work to hire my own first guy. you might check with a temp service or labor ready place you might find a "helper" who you can train up and turn into a good electrician, I don't think it is likely but it might work.
 
bikeindy said:
It is very difficult to have a guy be a sub who is his own EC. It has been tried but so much paperwork to prove to the state and feds and ins company. There are a lot of rules, that said it is also hard to find a guy who can be part time at first if your don't have enough work for him to make 40 hrs. I had this dilemma when I was growing because you have to grow at a rate you can handle. Here is what I was able to pull off. I use to work for a guy who is an EC and we are still great friends, I even send him work from time to time and vice versa, when I was growing I asked for his advice, he told me to let him know when I needed a helper he would provide the helper for a $ amount per hour and take care of all the paperwork as if he was paying him. Much like a temp service does, only I was getting a qualified guy. worked great till I had enough work to hire my own first guy. you might check with a temp service or labor ready place you might find a "helper" who you can train up and turn into a good electrician, I don't think it is likely but it might work.
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Ok I am gonna do the payroll deal. Do I need to start a business or can I use my s.s. # like I have been.
 
In my opinion if you are going to run a business, run it like a business, federal tax id number, employees with benefits, you should strive to be professial as possible. Does it cost more yes, but it has it's rewards. YOUR LEGAL.
 
JOHNEO99 said:
Ok I am gonna do the payroll deal. Do I need to start a business or can I use my s.s. # like I have been.
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You need a Federal ID and buy something like Quickbooks (thats what I use) you can do payroll and everything else you need to do. If you have just one employee it is very simple. You can get your Federal ID (tax ID) online at www.irs.gov
 
Lets not forget the workmans comp insurance, and the liability insurance carrier probably has a line in your policy about notifiying them if you hire. For only one employee, I would start him off by using a payroll service, you look around, you will find one that allows you to send in the employee of your choice to them, then they hire him and send him back to you for a price, but all the taxes, insurance,paperwork, is done for you. Later when you can put it together, you hire him onto your payroll, but now you will be able to afford all the stuff cause you (hopefully) bill at a high enough rate to pay for him and make a healthy proffit off his labor.
 
macmikeman said:
Lets not forget the workmans comp insurance, and the liability insurance carrier probably has a line in your policy about notifiying them if you hire. For only one employee, I would start him off by using a payroll service, you look around, you will find one that allows you to send in the employee of your choice to them, then they hire him and send him back to you for a price, but all the taxes, insurance,paperwork, is done for you. Later when you can put it together, you hire him onto your payroll, but now you will be able to afford all the stuff cause you (hopefully) bill at a high enough rate to pay for him and make a healthy proffit off his labor.
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Thanks all for the info it was of some interest. For the most part I knew about the info recieved but it was good to get insight on this matter. The link to how to get the federal tax id # was interesting as well.

Specifically I am looking for ways to structure this company in a way to recieve the most tax relief as legally possible and I was hoping someone had some links to publications and/or articles on this matter.

Any help is appreciated and will be listened to and learned from.


John
 
Hey John,
Several books have been written on the subject of starting and operating an electrical contracting business. I haven?t read any on this subject, therefore I can?t help with a recommendation. Maybe others on the forum have recommendations.
Here is one title from Jones and Bartlett Publishers; Successful Electrical Contracting, 2001 Edition by Paul A. Rosenberg. Click on the electrical link at www.jbpub.com
Depending on the state where you live, there may be another helpful book. Some states have a business and law segment on the master or electrical contractor exam. The business and law text, required for the exam, contains quite a bit of useful information.
Charles
 
There is no reason that you cannot be a sole proprietorship with employees.
There are many protections and advantages to incorporating, though it has attendant expenses.
Worker's Comp or not, if this guy takes a high dive off your extension ladder, he could end up living in your house instead of you.
By all means, talk to a CPA, but investigate business structure with a lawyer who can tell you about covering your assets.
Good luck in your endeavors.
 
robertwilber said:
There is no reason that you cannot be a sole proprietorship with employees.
There are many protections and advantages to incorporating, though it has attendant expenses.
Worker's Comp or not, if this guy takes a high dive off your extension ladder, he could end up living in your house instead of you.
By all means, talk to a CPA, but investigate business structure with a lawyer who can tell you about covering your assets.
Good luck in your endeavors.
Click to expand...

I've echo'd these thoughts in many posts over the years. I think in this case, though, that just consulting with a CPA will suffice for the time being. I don't see any benefit of him incorporating at this stage. He can do that at any point. We didn't incorporate until my father had been in business for 30 years. Don't get me wrong there are benefits. I just don't think there are any for him at this stage.
 
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