IncSmart California (Small Business and Startups) - When you hire an independent contractor, you should create a written and signed independent contractor agreement. This allows you to clearly define the work and responsibilities of your hired contractor. An independent contractor agreement may also help you avoid questions and protect you from liability in court and state taxes.
See the California Corporation Code Section 191. This can be used to identify who is a contractor and who is an employee in the state of California. You can also consider using Independent Contractors instead of filing Foreign Qualifications in other states. It may save you money of filing fees and annual reports. Check with your CPA.
1. With a corporation, the Business Owner establishes instant credibility for his venture. He (or she) is now the President of a company that is properly structured to generate respect from customers, suppliers, banks, investors, lenders and others.
2. The corporation provides a protective wall that shields the Business Owner's personal assets if his corporation becomes the target of lawsuits that are related to company activities. The Independent Contractor's home, cash, retirement savings and other assets cannot normally be confiscated to satisfy a legal judgement against his (or her) corporation.
3. An incorporated business can operate very easily out of the Independent Contractor's personal residence. This "Home Office" arrangement can create valuable business deductions that reduce the amount of income taxes that are payable to the Federal and Local Government at year-end.
4. A sound corporate structure provides valuable tax deductions for health insurance, telephone, travel, entertainment and other legitimate expenses that help reduce the company's tax bill.
5. If the Independent Contractor performs work for a small number of clients, the corporation can help prevent him (or her) from being treated as a company employee for income tax purposes. This is a very important distinction because when the Independent Contractor is incorporated, his clients are not generally obligated to withhold the income (and FICA) taxes that are applied to employee wages.
6. The corporate (or LLC) structure normally reduces the Independent Contractor's business insurance and liability costs. Remember, if your personal assets are protected from your company's lawsuits, you have fewer assets to insure and less premiums to pay
By David Oliver
Starting a Business in California - California Corporation - California LLC
For 10 years, IncSmart.biz Business Services has helped companies and people from all over the world form California Corporations and California Limited Liability Companies. When you call, email, text, message or live chat with our office, expect personal attention. Small business is the heart of IncSmart. #incsmart
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