Question by Inquisitive: More financially beneficial to me – hiring contract labor or an employee?
I have a home-based business which is a music studio. I teach piano, and I’ve hired someone to teach guitar. I did my homework and made sure I did everything right and legal in hiring him as contract labor, mostly because it’s simpler with less paperwork. But with extra paperwork (that I don’t know how to do yet) I can hire him as an employee, and I would if it were financially beneficial to me particularly at tax time. Is it?
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Answer by RecruiterTips
This is a great question for an accountant and an attorney. The short of it is hiring someone is more about long term exposure to risk not about money. When you hire someone on contract you are paying fees to whomever you did the contract with. If it is the person you hired, then they have to pay for things like self-employment taxes etc. but you can let go of that person any time you want. On the other hand, if you want to get a benefits package, it is always better to have a group. That means 2 or more people.
My advice; take it up with you accountant and attorney.
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