Are you ready to expand your staging business and add on more help? Do you need an Independent Contractor or an employee? You better know, or the tax man may hit you with HUGE fines.
Today I was on the phone with someone about our Market Read Real Estate online home staging consultation program. They are expanding their staging business (in the US) and asked if there was a portal that they could use for their Independent Contractors, so that they didn’t know that it was our program. You see, they were concerned that the contractors would eventually get good at what they are doing and consider leaving, taking the technology that they taught them to use with them.
Immediately I saw red flags jumping up in front of my face. Since I’m an educator at heart, and don’t want to see this very nice entrepreneur fined out of business I thought I would give a little education. As soon as I hung up I knew that it might be time for a blog about this.
Watch for our new Home Staging Business Continuing Education Course Coming Soon! We’ll discuss this topic and many others in depth, in person. Coming to Jacksonville, Dallas, Atlanta, and Indianapolis later this year!
Are your home stagers independent contractors or employees?
The first part of understanding this is to know what the law says about it. According to the IRS, you need to address these three questions.
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
You see, the giant red flag for me was that she mentioned in her explanation that she had a no-compete agreement and that may be enough to protect her if they decided to go on their own.
Can an independent contractor have a no compete agreement?
Can you and should you are probably two different questions. You can ask anyone to sign a no compete agreement. If they are really independent contractors though, they are completely unenforceable.
Let’s look back at the IRS guidelines. Do you see any problems?
The entire point of an independent contractor is that they are independent. They don’t rely on you to control their employment. This means that they not only can, but should, get other work on their own. Sure, you can have independent contractors that work only for you, but that’s their decision, not yours.
The moment you sign paperwork that say that you work for me and only me, guess what you’ve done? That’s right, you now control their income. You control their work arrangements, and you have a written contract. Boom. You may have just created an employee, according to IRS guidelines. If you aren’t paying taxes and insurance (like workers comp) on your employees and they find out, you may be heavily fined and forced to pay back taxes on all of your independent contractors since your company started.
So how do you keep independent contractors from leaving you and stealing your business?
Again, these are probably two different questions in reality.
The first part, you can’t control, except to create a culture of greatness that your contractors don’t want to leave. If they know they have it good, there is less of a chance they’ll leave. Pay them well. Treat them well. Surprise them with bonuses and team spirit. Give them what they need to be happy working with you (not for you).
Then have a contract in place that protects your intellectual property, and your database.
Any business relationships that have been forged by your company can be yours by contract. This is legally enforceable, but not practically enforceable. Let’s face it, if your contractor leaves you and your best customer likes them better than you, it doesn’t really matter what the contractor signed, you’ve already lost that customer.
Again, the best way to protect your business is to have a great business. Be the face of your business, or make an EMPLOYEE the face of your business. Make sure that you are selling your BRAND and not any particular person. Pay attention to the relationships and business partnerships. Be the company that no one wants to leave. Leverage your business. Leverage your USP (unique selling proposition).
One last piece of advice, don’t give any one person, unless they are a part owner of your company (and even then I would think twice) the ability to run your company without you. If you do, chances are they will at least try.
Watch for our new Home Staging Business Continuing Education Course Coming Soon! We’ll discuss this topic and many others in depth, in person. Coming to Jacksonville, Dallas, Atlanta, and Indianapolis later this year!
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