4 ms·

It doesn't sound like you can afford an employee, even if the cost of payroll taxes and such were zero. You can barely cover a consult with a lawyer and account

It doesn't sound like you can afford an employee, even if the cost of payroll taxes and such were zero. You can barely cover a consult with a lawyer and accountant to understand the labor laws and get payroll set up. $200-300/month just doesn't justify that kind of paid help. If you wanted to invest some of your money to have him do something for you, it'd more realistically be as an independent contractor, not as an employee. If you feel bad about having him do work on your side business un-compensated, and can't afford to compensate him what you feel he's worth, the only right thing to do may be to not have him work on your side business. Perhaps you can repay his volunteer efforts so far by helping him start his own business or project of some sort. Careful with the volunteering thing either way. If someone's treated as an employee, and doing the work an employee would do, they are owed minimum wage, no matter what you each call the relationship. The IRS and state want their income and payroll taxes.

orware 13y ago
Hi Dan, thanks for the reply!. Back in 2006 I ended up starting an LLC (nieve young man that I was), but didn't end up getting my business taxes done by an accountant until 2008, and I ended up shuttering the LLC aspect of the business shortly thereafter because of the automatic $800/yr that California charges in taxes for that privilege. In mid-2010 I started the software business (first time I had gone that route, prior to this with the LLC it was mainly work creating websites for other local businesses which never amounted to much since our area just isn't very tech savvy and I didn't market myself online). This I can say was my first real success (in that I was able to create a mini-business that actually resulted in some profit at the end of the year) and I've been maintaining that ever since, but it hasn't really grown much over the past few years (though updates have been put out, I haven't developed as many of the new products I had ideas for, primarily because the day job eats up so much of my energy and pays the bills). My goal though is to eventually build up that mini-business enough where I could provide a few local development jobs and maybe start building up that sort of industry locally, since our location doesn't really matter when we can market to the world at large :-). (Our county has the highest unemployment in California at about 25%). As far as the lawyer/labor laws stuff, I do believe you're right there, though I was hoping a new service like Zen Payroll would allow me to not have to worry about those sorts of things and just worry about getting money to/from the employees. You're also right that $200-$300/mo doesn't really justify paid help, to a degree, but since I have my day job and can't put a lot of energy into the software business, getting some help to build out those ideas for new products wouldn't be a bad idea. Right now he's volunteering to gain experience, but as I've decided to do a few small contracting development jobs recently (mainly to earn some extra money for the business so I can give him something) I'm giving him some of that extra money and paying for the lunches we're having together as an additional thank you. So far I haven't given him enough to justify making him an independent contractor and doing any W-9 stuff, but I'd definitely like to do more for him if I can, I'm just looking to see what the best options might be.
- gamblor956 13y ago
  You need to talk to a lawyer, despite the expense. Your "volunteer" sounds like an employee, and the situation sounds a lot like one of the abusive internship situations. In a nutshell, your volunteer is entitled to compensation for his work, and even if you never paid or don't actually pay him, the various federal governments will simply treat that as a timing difference. They'll want their taxes and FICA on the compensation, and failure to pay those amounts can lead to fines and penalties that easily exceed the amount of money you bring in from the business on an annual basis.
  - orware 13y ago
    He is a volunteer and not an employee. And I wouldn't consider this an abusive internship situation. What he's officially doing is getting some real-world experience which he actually needs and we've gone through the volunteer process here at my day job (a community college) to provide him with that volunteer coverage and he's coming 3 days a week and helping me out with little projects that I've been backlogged on and he's been having a good time doing that. That is a volunteer situation and not an abusive internship at all. However, we cannot hire him here at my day job (since we're a public institution, there's a lengthy hiring process even if we had a position available, which has it's own length budgeting and creation process). If he were taking 6 units or more, we could potentially hire him as a student worker, but since he finished his degree he's not looking to take any additional classes right now. And having unpaid volunteers is not unprecedented. The money I paid to him as a thank you before was out of my own pocket for the volunteer work he had been doing for us here at the college since he wasn't getting paid for that work and I appreciate the assistance he's able to provide. As I mentioned previously though, I'd like to do more for him so I'm exploring this option of possibly doing some sort of hiring if it's possible in my software business, and have him help out with those separate projects (outside of his normal volunteer role), since I cannot do anything more for him except have him volunteer at the moment. Primarily because I do want him to be paid and start building a career for himself. However, I feel like you may think I'm taking advantage of a situation in a negative way and that's not how it is at all, in fact quite the opposite.

orware 13y ago

Hi Dan, thanks for the reply!. Back in 2006 I ended up starting an LLC (nieve young man that I was), but didn't end up getting my business taxes done by an accountant until 2008, and I ended up shuttering the LLC aspect of the business shortly thereafter because of the automatic $800/yr that California charges in taxes for that privilege. In mid-2010 I started the software business (first time I had gone that route, prior to this with the LLC it was mainly work creating websites for other local businesses which never amounted to much since our area just isn't very tech savvy and I didn't market myself online). This I can say was my first real success (in that I was able to create a mini-business that actually resulted in some profit at the end of the year) and I've been maintaining that ever since, but it hasn't really grown much over the past few years (though updates have been put out, I haven't developed as many of the new products I had ideas for, primarily because the day job eats up so much of my energy and pays the bills). My goal though is to eventually build up that mini-business enough where I could provide a few local development jobs and maybe start building up that sort of industry locally, since our location doesn't really matter when we can market to the world at large :-). (Our county has the highest unemployment in California at about 25%). As far as the lawyer/labor laws stuff, I do believe you're right there, though I was hoping a new service like Zen Payroll would allow me to not have to worry about those sorts of things and just worry about getting money to/from the employees. You're also right that $200-$300/mo doesn't really justify paid help, to a degree, but since I have my day job and can't put a lot of energy into the software business, getting some help to build out those ideas for new products wouldn't be a bad idea. Right now he's volunteering to gain experience, but as I've decided to do a few small contracting development jobs recently (mainly to earn some extra money for the business so I can give him something) I'm giving him some of that extra money and paying for the lunches we're having together as an additional thank you. So far I haven't given him enough to justify making him an independent contractor and doing any W-9 stuff, but I'd definitely like to do more for him if I can, I'm just looking to see what the best options might be.

gamblor956 13y ago
You need to talk to a lawyer, despite the expense. Your "volunteer" sounds like an employee, and the situation sounds a lot like one of the abusive internship situations. In a nutshell, your volunteer is entitled to compensation for his work, and even if you never paid or don't actually pay him, the various federal governments will simply treat that as a timing difference. They'll want their taxes and FICA on the compensation, and failure to pay those amounts can lead to fines and penalties that easily exceed the amount of money you bring in from the business on an annual basis.
- orware 13y ago
  He is a volunteer and not an employee. And I wouldn't consider this an abusive internship situation. What he's officially doing is getting some real-world experience which he actually needs and we've gone through the volunteer process here at my day job (a community college) to provide him with that volunteer coverage and he's coming 3 days a week and helping me out with little projects that I've been backlogged on and he's been having a good time doing that. That is a volunteer situation and not an abusive internship at all. However, we cannot hire him here at my day job (since we're a public institution, there's a lengthy hiring process even if we had a position available, which has it's own length budgeting and creation process). If he were taking 6 units or more, we could potentially hire him as a student worker, but since he finished his degree he's not looking to take any additional classes right now. And having unpaid volunteers is not unprecedented. The money I paid to him as a thank you before was out of my own pocket for the volunteer work he had been doing for us here at the college since he wasn't getting paid for that work and I appreciate the assistance he's able to provide. As I mentioned previously though, I'd like to do more for him so I'm exploring this option of possibly doing some sort of hiring if it's possible in my software business, and have him help out with those separate projects (outside of his normal volunteer role), since I cannot do anything more for him except have him volunteer at the moment. Primarily because I do want him to be paid and start building a career for himself. However, I feel like you may think I'm taking advantage of a situation in a negative way and that's not how it is at all, in fact quite the opposite.