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Discussion Starter · #1 · (Edited)
Hey guys, I as well need a professional opinion. I started my masonry business last year. I have two guys that work for me for cash. Unfortunately I dont have enough work to have them work full time every week, every month. But I do have them work quite abit. Would it be better on taxes to have them listed as part time employees and put them on wage and pay for unemployment, fica, etc, or would it be better to keep paying them cash. I myself make roughly $60k and when all is said and done after paying them, more like 40-45. But I have all my expenses. Vehicle, equipment, I give them both rides cuz neither has a license. ONe meets at my house the other I pick up. Im ranting, anyway, which is best?

edit: I would like to add that business is picking up pretty good. I got one new homebuilder that does about 100 homes a year and has masonry on all of them.
 

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Holy cow. That 60 grand a year can go to zero a year if one of these guys gets hurt. You're operating on the other side of the legal line, for sure. They're your guys. You owe it to them to employ them legally... for both your sakes.
 

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Call paychex to get setup legally. They handle all my payroll issues and would even handle my WC if I wanted them to, but I had WC before I had a legitimate payroll.

You owe it to your workers and to yourself to do it right because once, you get caught, and you will get caught, you will get hammered big time probably putting you in bankruptcy.
 

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I would NEVER pay cash for help. Do it on the up and up before it bites you in the arse.
 

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My brother who works HVAC gets some on the up and up and some on the down low. His boss does this because it keeps his WC rate low but it hurts my brother because even though he earns about $50k a year on paper it looks like $25k. Who would give someone a loan for a car or house if they only earn $25k a year?

Honestly as an employee I'd take a pay cut to be legitimate if I were int he market to buy a house. Infact I know a few guys who did that years ago.
 

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Discussion Starter · #7 ·
Well thanks guys. I knew it wasnt good to pay in cash all the time but I didnt know it wasnt that not good. I am going to get on the phone right now and try to find a CPA to help me with all this and maybe switch to an LLC or Inc. Apprecriate all the input.
 

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Definetly incorporate or form an LLC. Either one is the way to go if you are running a business IMO. I cant even think about what would happen with catostraphic failure if I were a sole proprietor. That'd be total loss of my own person assets, including that new truck of yours :)

At least if you are an LLC or INC they can only touch what the company owns. If your company owns nothing, like my company owns nothing, they can't sue you for anything.
 

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Their may be another option, If these guy start a subcontracting biz you can 1099 them, but you will probably have to cover them with wc insur. to start them off. I have 3 guys I use that all have their own biz with wc and work only for me. It works great because they pay their taxes and insurance with alot less hassels for me. It works for them because they get all the bennies of having a buisness without having to look for the work if you can keep them bizzy.
 

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I have two buddies that I pay under the table, both are fellow Vietnam vets. One (a carpenter) lives in a warehouse, the other (a painter) just moved into a small trailer. Both have landmines in common. In this case, I don't mind fueling a few bucks into their economy. I find it sickening that disabled vets are forced into living in near squalor when we are giving billions away to other countries. They are the ones that allowed us to amass this money.
Let the Feds put me away, I've been in worse places.
 

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magnum said:
Their may be another option, If these guy start a subcontracting biz you can 1099 them, but you will probably have to cover them with wc insur. to start them off. I have 3 guys I use that all have their own biz with wc and work only for me. It works great because they pay their taxes and insurance with alot less hassels for me. It works for them because they get all the bennies of having a buisness without having to look for the work if you can keep them bizzy.
That's borderline illegal. You are REALLY walking a fine line and taking a big chance doing it that way IMO. I know this is how all the low ballers keep costs low in my area. They have a crew of 5 guys and every guy is his own company.

Are they subs or employees? Ask the IRS http://www.irs.gov/govt/fslg/article/0,,id=112718,00.html http://www.irs.gov/pub/irs-regs/subcontractorsfaq&a.prn.pdf
 

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Everybody, please get your business on the up and up. Paying under the table is as bad as employing illegals. It hurts your local economy and what is much worse it hurts you by under mining your local market.

If you can't afford to pay legitimately then you aren't charging enough. You get enough guys doing what you are doing and you are depressing the market and the rates you can charge.

Keep the playing field even and let everybody have a chance at making a decent living and creating a retirement. Don't work all your life only to one day look up and find you finally reached the dead end of the alley you have been working and creating for yourself.
 

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In all states I know of, creating a LLC will be worthless if you don't have proper insurance. The courts call it "piercing the veil".
A paid up copy of your insurance policy is an effective sales tool also.
 

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Oh definately, at the very least a general liability policy is a flat out must-have, even if just for piece of mind and knowing your ass is covered. Even if I didnt have an LLC, for the whole $8.67 a week it works out as costing me, I would still carry a policy. I know states and trades differ and such, but for the price of a trip to Taco Bell each week, isnt it worth it? I dont know how it works in all states for WC, but here you are allowed to exempt from coverage 2 people, so all WC ends up costing after the audit refund is whatever the state minimum is, in Wisconsin thats $260. GC's and HO's like to see all that stuff in order and it does indeed help bring in the work or at least get you the nod over the guys with a truck full of tools and a couple cheap laborers who doesnt. HO's are always concerned with price, but they like to know that their ass wont be left swingin' in the breeze if something goes wrong too.
 

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Discussion Starter · #15 ·
I do have general liability to the sum of $1 million dollars. It is cheap. I think I paid $500 for the year and another 150 to cover all of my scaffolding, mixer, heaters, and brick saws. As well as misc items. My only concern was not being able to keep them in work as much as I would like and how it would affect me on taxes. But since I have posted this I have been talking to some CPA's to get me set up with the proper WC insurance and Unemployment bennies for them when not working. Don't know all the exacts yet but at least now I will be completely legit.
 

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Good to hear. Just look at the yellow pages under attorney.
Do you want to feed those guys, or let an insurance company sweat it!
 

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Even if you stay under the 1099 yearly threshold, always write a check.

And hey Teetor, no Vet is forced to do anything. Dysfunctionality is not the norm for military veterans, but hats off to you for caring about the struggling few.

We all lack appreciation for our vets who serve at the discretion of politics, today and yesteryear. Ya'll support our guys! What Teetor does is a drop in the bucket. Why do we forget these guys?

A man I did some work for years ago, he ran the Mogadishu mile, like some of you saw in the movie "Blackhawk Down". He told me a soldier is trained not to care about politics, and to focus on getting the job done. My point is that he also told me how in the military he was catered to. Furnished with a bunk and three square meals, these guys, who were cared for as kids when they signed up, have a hard time adjusting to the "real world". It's a shock. Then factor in real combat experience.

Cash or whatever, the law be damned, hats off to Teetor!
 

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6stringmason said:
Well thanks guys. I knew it wasnt good to pay in cash all the time but I didnt know it wasnt that not good. I am going to get on the phone right now and try to find a CPA to help me with all this and maybe switch to an LLC or Inc. Apprecriate all the input.
I'd recommend that you set yourself up as an S-corp. This provides the same asset shield as a C-corp, and you are not taxed twice (you are not taxed at the corporate level and again personally - the corporate earnings pass directly to you and are taxed once). In addition you can work a little (legal) magic with how you pay yourself, taking some money in salary and some in dividends. On the salary portion you will be paying fica and medicare, on the dividends you will not. This is legal, but you should get guidance from an accountant.

As to your workers, they really don't qualify as independent contractors. Certain factors have been laid out by the IRS (and in case law) which compose a 'test' of sorts to see who is an independent contractor (set their own hours, paid by the job, not by the hour, etc).

Labor Ready and other such outfits provide legal (and insured) day labor, but I've seen moss grow on the north side of some of those slugs...

Oh and THIS IS NOT LEGAL ADVICE AND IS INTENDED ONLY FOR INFORMATIONAL AND ENTERTAINMENT PURPOSES AND BLAH BLAH BLAH
 

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WC is so G* D* Expensive!

Mike Finley said:
Everybody, please get your business on the up and up. Paying under the table is as bad as employing illegals. It hurts your local economy and what is much worse it hurts you by under mining your local market.

Illegals are a fact of life and so is paying under the table once in a while. It happens. It's part of the economy. The police in our area have set up a day labor center for the illegal workers which seem like an irony but protects illegals from getting stiffed and businesses from just going out into the street to get someone.

I've seen a lot of small start up contractors pay under the table, just to get their businesses going. But most of them go legit as they can afford WC which here in CA is outrageous. That along with the cost of payroll taxes can make being in business completely unprofitable here for a start up. And you can in part blame legitimate shops who sub out to contractors for that. They set the payrate so low that a subcontractor HAS to pay under the table to make what they pay fit the budget.

A vicisous cycle if you ask me. And not one easily broken just by telling someone to go and get WC and pay everyone legitimately. Great if it worked that way, but the truth is it doesn't work that way.
 

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Grainywood said:
A vicisous cycle if you ask me. And not one easily broken just by telling someone to go and get WC and pay everyone legitimately. Great if it worked that way, but the truth is it doesn't work that way.
Sorry, don't buy it.

A) Fact - it works for some - (doing it legit)

B) Fact - it doesn't work for others - (those who are paying under the table, hiring illegals)

Solve the riddle - whats the difference between contractors in the A group and contractors in the B group?
 
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