Should I have W-2 or 1099 employees?
Payroll can be a difficult process to the business owner who is trying to handle everything.
Many times as employers we do not know where to begin.
It is important to understand the type of individual that will work in your establishment. Based on your business needs, you will either have an employee or an independent contractor.
Independent contractors are usually 1099 employees and free to manage their own schedule and direction of the employer with regard to the performance of the work. They work on demand or on various projects. For example, a retail store may contract with an electrician to perform repairs which is unrelated to the store’s usual course of business.
Generally, independent contractors are self employed and will perform similar work for different companies using special expertise or equipment that the hiring company does not possess. Independent contractors are not subject to the withholding of federal, state, or local tax by an employer, so it will always be their responsibility to follow their state’s tax laws.
On the other hand, you can interview and hire employees who are controlled with set schedules, offered benefits and jobs that are determined by the description. This is a W-2 employee. For example, a school hires a full time teacher to educate students; it is clearly part of the company’s usual business operations
Business owners will withhold their Social Security and Medicare taxes, and pay employer payroll taxes.
W-2 employees are committed to your company which could have the potential of a great return in the form of big dividends. They can free up time for business owners because you will have the capability to delegate several tasks to the employee.
As an employer, you have to decide if 1099 or W-2 employees works best with the budget, the amount of control you would like to have over the process and final product, and the type of work you will offer.