Today's article is a follow-up to that from April 17th entitled "Know This If You Applied for SBA Loan..." in which we discussed distinctions between W2 and 1099 workers and how states are beginning to crack down on misused classifications. California is paving the way with other states following suit. Why is this so important? There are tax and legal implications that can bankrupt or shut down your business. The "way it's always been done" is no safety blanket. Don't feel invincible - the State is just as interested in the small guys as big businesses.
Example: If a 1099 worker should be classified as a W2, the State can potentially cite that person for unlicensed contracting, which can carry administrative, civil, and criminal penalties based on your state (Tennessee checks all 3 boxes). Failing to have proper worker's compensation policies reflecting accurate information about your company can carry massive penalties as well. You think you're saving a dollar, but you're potentially racking up a large bill of penalties that can change the state of your finances, your life, and that of your family forever.
1. If you are operating as a "DBA," you have no personal protection. We can help you form the proper business entity. It's a quick and relatively inexpensive investment in yourself.
2. If you don't use any forms, we can create user-friendly subcontract agreements, among a variety of other documents. People think a form serves only to help get paid, but countless other benefits exist like outlining scopes, responsibilities, and classifications.
Please see the attachment for more information about changes in California's law on the W2 v. 1099 front and insight into how you can be impacted in your state.
To speak regarding payroll assistance, feel free to contact someone such as Anna Cotten with ADP at (615) 618-7519 - she can help all over the country. To discuss an action plan and solutions for your business going forward, visit our Contact Us page!