Forums: Discussions for entrepreneurs and small business.

The IRS, at http://www.irs.gov/businesses/small/article/0,,id=99921,00.html, has guidance on the difference between independent contractors and employees.

 

Molly Donaldson

Shawn,

 

The three questions to determine if they are a true employee are:

1) Does your company control when, where and/or how work is done?

2) Does your company provide the tools and supplies the worker will use?

3) Does the worker work only for your company?

 

You are probably ok on 1 & 2, but number 3 may be the issue in your case. IRS regs are typically that the person is an employee unless you can prove that they are not.

 

Best regards,

Molly Donaldson

You might be better off contracting with a professional sales rep company for your type of product rather than hiring an independent contractor.  These firms represent multiple companies and are paid a percentage of what they sell in their service area. 

 

There are two main advantages to these types of companies.  First, you don`t have to worry about IRS rules.  The person you will deal with will be an employee of another company.  Two, since these sales rep firms represent multiple companies with compatible products, you get greater product exposure without increase cost.

 

I used to work in the door hardware industry for example.  Our company contracted with professional sales rep.  She was a sales representative for a door manufacturer, door window supplier, floral designer for entry ways and our company.  Every time she did a sales call for one of the other companies, she would work our product lines into the converation.  If she was going on a sales call for us, she would suggest the potential client buy doors from her door supplier.  This resulted in greater exposure of our product without any increase in our sales contract cost.  She also fed leads to us she received while repping her other product lines.

 

This is just an ideal you might want to think about.