Starting Up, Could Use Some Help

Danno6102

Working on starting up a remodeling business on the side for now to see how things go, hoping to go fulltime in the near future if things go well. I need a little help figuring out what I can & can't place in my overhead rates & what I can do as far as an "employee".

Right now I'm just going to set it up as a Sole Proprietorship. I plan on having one other "employee", but I don't think I can have an actual employee on my payroll being a SP. Should I just treat him as a sub & send him a 1099 at the end of the year? Should I withhold his taxes for him? He's not very good with managing his money & would likely spend every last dime I pay him & have to come up with $$$$$ to pay his taxes at the end of the year. He's a great employee & knowledge base, so I wouldn't mind doing him this favor.

Second is my overhead. Being that this is a SP, what can I legally add to my overhead? Ideally I'd like to put my truck payment, I have a third vehicle I usually drive for gas reasons, truck registration, insurance, maintenance, & feul. What about liability insurance, tool replacement, general consumables like saw blades, bit, etc, or provisions for a new vehicle.

Thanks in advance & for any other tips you might have to offer.

Dan

J F

Danno

Your first stop should be to an accountant...spend a couple hundred bucks on a good sit down...you'll save yourself a lot of aggrivation (and money) down the road.

And the IRS would probably have a big problem with you classifiying your employee as a sub-contractor.

Will he supply his own tools, set his own schedule, etc? If not, then he can't legally be classified as a sub. This will be something your accountant can walk you through as well as your overhead questions.

Good luck.

J

Second Look

You've set the bar pretty low, so the likelihood of meeting the goals seems quite high. Unfortunately, meeting those goals won't accomplish much. Try setting much more ambitious goals and git er done.

__________________
Second Look home improvement www.SecondLookHome.com
Handyman and Home Repair Specialist in Rhode Island
RI Licensed Lead Safe Remodeler/Renovator, RI Registered & Insured Contractor

Second Look

Of course a person can hire an employee. A corporation is nothing more than a fictitious person (corp is Latin for "body" after all). You may need an Employer ID number from the IRS, also will need to do withholding and have a Worker's Comp policy.

__________________
Second Look home improvement www.SecondLookHome.com
Handyman and Home Repair Specialist in Rhode Island
RI Licensed Lead Safe Remodeler/Renovator, RI Registered & Insured Contractor

Danno6102

See, I wanted to stay away from all that WC & withholding crap. I can handle holding on to 30% of his pay until the end of the year. I probably just need to do it.

EDIT: I did a little more research on this & I think I can classify him as an Independent Contractor. He is my Brother-in-law, but he does work for two other GC right now, I would be the third. What I don't understand is the statement that says "A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result." If he is not roofing a house how I want it roofed, I can't tell him how I want it done? GC's do this all the time with subs, how's it any different?

Also, setting the bar low to get a feel for the amount work out there & income that it will provide. I still need a steady income with a wife & two kids, mortgage, car loans, etc.

john elliott

Well, if he continues working for other employers then you are in the clear. As long as you are only one of his employers and not the main one then there is no problem.
I'm guessing, though, that you foresee using him most of the time, in which case he will be your employee and you will have to observe all the legal requirements accordingly, no matter how onerous

Jophn

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Ed the Roofer said "John too, in his crass and blunt demeanor.............."

send_it_all

If you are paying him hourly and you are his boss...he is your employee. Thousands of legitimate contractors...yes, even sole proprieters, have employees and pay worker's comp. and even turn a profit. I'm one of them....except for the profit part.

dirt diggler

im assuming you have a full time job as well

do you have any jobs lined up??

why throw yourself into a fire with hiring someone right off the bat???



i just don't


oh nevermind

do what you want

Second Look

You can tell him how you want it to end up, but not how to do the work. As an independent contractor, he can carry 10 bundles of shingles to the roof and lay out the bundles, or go get a new bundle each time he needs one. He can use the type of blade and knife he wishes as long as the finished work meets your standards. Heck, he can gnaw shingles with his teeth as long as the edge is straight and it meets your specs. He can hold the nails in his mouth, his hand or his nail pouch... his choice because you're paying for results, not for the right to dictate how the work is done. You can specify felt overlap and how many nails in the felt, but it's up to him if he wants to roll the felt left to right or right to left. And so on...

Hope that helps.

__________________
Second Look home improvement www.SecondLookHome.com
Handyman and Home Repair Specialist in Rhode Island
RI Licensed Lead Safe Remodeler/Renovator, RI Registered & Insured Contractor

Danno6102

Dirt, That's what I'm trying to stay away from, forever! I don't want an employee. I want someone to help me out when I need it & they can worry about their own taxes, FICA, Workers Comp, Health Insurance, etc.

One job lined up, installing some french doors. Haven't really been chasing anything yet. Just trying to get everything organized & figured out before I get too involved or, hopefully, overloaded with work to have any time to figure it out later.

A bonus to having someone working for me, either Ind. Con. or employee, is that they can at the very least start covering my overhead while I sit at work & I can probably skim a couple bucks an hour of his wages to cover the time I spent estimating & other crap at home in the evenings. Only downside to an employee is the risk & added cost involved, which is why I do not want one.

SL, That what I was wondering about. I didn't think I could tell him anything. As long as I can tell him how I want something detailed, then I am fine with that. I guess no differnt than the drawings we have here at work showing the subs exactly how to connect the joists etc.

Thanks all,
Dan

john elliott

The Holy Grail of all kinds of contracting

John

__________________
Ed the Roofer said "John too, in his crass and blunt demeanor.............."

Geno

I'm basically in the same boat as Danno, except that I'm currently working on a job F/T with a single employee and I've been paying him weekly without withholding any taxes.

I've been told also by other business owners that it's better for now to just get a Federal Tax ID no. and 1099 your 'employee'- is this legit, or am I just setting myself up for disaster with the IRS?

Geno

dirt diggler

you're kinda wantin to have your cake and eat it too

don't blame you though ... right now, after 3 years im in that position


i'm at the point i don't have enough work to envision realistically providing a salary to a full time employee


but - at the same time --- I've got waaaaaay more work than I can handle by myself (even using subs). Can't sub EVERYTHING out. At least I can't


but, you and I are at different points. You haven't started out yet. And that's hard enough in itself. Let alone having to deal with someone.



one other thing. It's kinda funny how (at least for me) you can work for someone, know your trade, etc. But then finding efficient ways to make things work out (i.e. make money) - that's a whole other ball game.

keep in mind - you only will make money when things go right.

and to make things go right - you almost need to have them go wrong first.

Mud Master

I don't know about that. My father has had a T&M Contract with United Parcel Service for the past 12 years. At one time, they kept him busy 40 hours a week/365 days a year. They were his only customer, and he is paid on an hourly rate of $45.00/hour per mechanic and $28.00/hour per helper.

Now, He has since picked up other customers like University of Maryland College Park, and Burger King has started to use him again(He used to work for them almost all the time as well back in the early 90's).

This is not what he has done his whole life in self employment. He has been in business 28 years and has worked on large & small projects, been a GC, a sub,built from the ground up, partial and whole remodels,you name it. Mostly commercial and industrial, select residential..

Had 21 guys at one time, but he was smart and got hooked up with a few different corporations that used him all the time(F&M's,Burger King,UPS,Double T Diner,to name a few). However as he has gotten older he did not want the hassle and frustration of bidding,estimates,management,etc anymore..and as severly gotten smaller down to just 3 guys including himself, and he loves it this way. Gets much more free time. With UPS he walks into a facility in the morning and they just give him stuff to do..and he gets the same rate whether it is changing a light bulb,painting,welding, or building an office. He only has to bid 3 or 4 times a year with them on work, usually concrete flat work. UMCP gives him the job automatically if its under $5,000.00 and Burger King is T&M as well.

I believe that it does not matter if you work for one organization or company full time or 10 companys half the time..as long as you are classified as a contractor, pay your own taxes, have your own payroll etc..than whether you work for one person or 50 should not make a difference.

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Mach

I seen subs kicked off jobs when they do sloppy work. Even though the work would have met the goal. I'm sure in a contract you could state "All work performed by contractor "A" shall meet company standards". I think this is a Grey area. I hear the Project manager yelling at the electricians all the time that they are doing it all wrong. He then some how loses power to his desk or trailer. Oh yeah those were the days, my foreman shut the breaker to the GC trailer off and put his lock out lock on it, and left for vacation Yes that was his last job with the company..