Independent Business Owner Resources

Things You Need To Know…

As a business owner, whether you hire someone as an independent contractor or as an employee will impact how much taxes you pay and the amount of taxes you withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information the worker must provide to you, and what tax documents you must give to the worker.

Here are a few tips to help Minnesota small business owners when considering whether to hire people as independent contractors or hire them as employees. If you are not from Minnesota, you may still use these guides, because they are offered by the IRS and applicable throughout the United States.

The IRS uses three characteristics to determine the relationship between a company and its workers: (1) Behavioral Control, (2) Financial Control, and (3) the Type of Relationship.

1.Behavioral Control. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.

2.Financial Control. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.

3.Type of Relationship. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

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