3 ms·

> "It doesn’t matter that you pay income taxes, what matters is that the employer isn’t paying payroll taxes, withholding income taxes, paying unemployment insu

> "It doesn’t matter that you pay income taxes, what matters is that the employer isn’t paying payroll taxes, withholding income taxes, paying unemployment insurance etc." I think we're talking past eachother here. The employer, in this case, is you (a company you own). You're also the only employee (a private person employed by that same company you own). If your company decides to pay you a salary, your company must also deduct taxes, social security, benefits, payroll taxes, income taxes, pension, etc. Your company must ensure the terms of your employment are compliant with all laws and regulations. Your client enters into a contractual agreement to buy a service from your company. They're not responsible for your company's compliance with local laws and regulations. Your company will be charging the client a certain rate (gross), which is usually worked backwards from the "net salary" you as an employee want to make.

sarchertech 4y ago
What you’re describing in the US and in the other jurisdictions I’m aware of essentially doesn’t exist. The vast majority of single person corporations are pass through entities. There’s no income tax withholding , no salary, no corporate tax etc… However even in the very rare case where you setup a non pass through entity, if your company only has one source of income and that is you the owner operating as a de facto employee of another corporation, in most jurisdictions that is false self employment. What you’re describing is an often attempted loophole, and there’s plenty of precedent that it doesn’t hold up.
- csmpltn 4y ago
  > "What you’re describing is an often attempted loophole, and there’s plenty of precedent that it doesn’t hold up." I strongly disagree, it's not a loophole, it's literally one of the most used incorporation methods in Norway ("aksjeselskap", or "AS"): https://www.altinn.no/en/start-and-run-business/planning-starting/Choosing-Legal-Structure/private-limited-companies/ https://www.altinn.no/en/start-and-run-business/planning-sta... This model isn't unique to Norway. Plenty of other countries offer similar incorporation methods.
  - sarchertech 4y ago
    The incorporation method isn’t the loophole. Paying someone through a corporation (regardless of its pass through status) and then treating them as an employee is the the attempted loophole. In the US and many other countries it doesn’t work.
    - csmpltn 4y ago
      > "Paying someone through a corporation (regardless of its pass through status) and then treating them as an employee is the attempted loophole" But isn't that exactly how consultancies work though? The client enters into a contractual agreement with the consultancy, asking for specific consultants to help the client get certain tasks done. The consultants are "treated as employees" in the sense that they often have to physically work with the client, on the client's projects, during the client's schedules, having lunch in the client's canteen, working with the client's team, reporting to the client directly, using the client's tools and processes, creating IP for the client, etc.
      - sarchertech 4y ago
        There is a 20 part tes(it’s actually now a 3 part test with 4-6 sub parts each but it’s substantially still the same). The fact that the consultant has to physically come into work at a specified time and uses the clients tools is evidence for them being employees. That their company receives income from multiple clients, and the engagement is for limited duration is evidence for them being contractors. The IRS and local governments make the final determination. https://www.everee.com/blog/irs-independent-contractor-test/ https://www.everee.com/blog/irs-independent-contractor-test/
        csmpltn 4y ago
        Thanks. If there's a subjective test involved, where some things are left to interpretation and circumstantial evidence, my take here is that it would be wisest to work with a lawyer/accountant on setting up the correct structure for each engagement. It's also good to remember that this is the IRS, and that other jurisdictions may have entirely different practices here.

sarchertech 4y ago

What you’re describing in the US and in the other jurisdictions I’m aware of essentially doesn’t exist. The vast majority of single person corporations are pass through entities. There’s no income tax withholding , no salary, no corporate tax etc… However even in the very rare case where you setup a non pass through entity, if your company only has one source of income and that is you the owner operating as a de facto employee of another corporation, in most jurisdictions that is false self employment. What you’re describing is an often attempted loophole, and there’s plenty of precedent that it doesn’t hold up.

csmpltn 4y ago
> "What you’re describing is an often attempted loophole, and there’s plenty of precedent that it doesn’t hold up." I strongly disagree, it's not a loophole, it's literally one of the most used incorporation methods in Norway ("aksjeselskap", or "AS"): https://www.altinn.no/en/start-and-run-business/planning-starting/Choosing-Legal-Structure/private-limited-companies/ https://www.altinn.no/en/start-and-run-business/planning-sta... This model isn't unique to Norway. Plenty of other countries offer similar incorporation methods.
- sarchertech 4y ago
  The incorporation method isn’t the loophole. Paying someone through a corporation (regardless of its pass through status) and then treating them as an employee is the the attempted loophole. In the US and many other countries it doesn’t work.
  - csmpltn 4y ago
    > "Paying someone through a corporation (regardless of its pass through status) and then treating them as an employee is the attempted loophole" But isn't that exactly how consultancies work though? The client enters into a contractual agreement with the consultancy, asking for specific consultants to help the client get certain tasks done. The consultants are "treated as employees" in the sense that they often have to physically work with the client, on the client's projects, during the client's schedules, having lunch in the client's canteen, working with the client's team, reporting to the client directly, using the client's tools and processes, creating IP for the client, etc.
    - sarchertech 4y ago
      There is a 20 part tes(it’s actually now a 3 part test with 4-6 sub parts each but it’s substantially still the same). The fact that the consultant has to physically come into work at a specified time and uses the clients tools is evidence for them being employees. That their company receives income from multiple clients, and the engagement is for limited duration is evidence for them being contractors. The IRS and local governments make the final determination. https://www.everee.com/blog/irs-independent-contractor-test/ https://www.everee.com/blog/irs-independent-contractor-test/
      - csmpltn 4y ago
        Thanks. If there's a subjective test involved, where some things are left to interpretation and circumstantial evidence, my take here is that it would be wisest to work with a lawyer/accountant on setting up the correct structure for each engagement. It's also good to remember that this is the IRS, and that other jurisdictions may have entirely different practices here.