My husband was offered a sales job, but they want him to form an LLC and pay him as a contractor-why?

Question

Also if he does this are there tax advantages?

Answer 1

Unless the job promises to pay VERY handsomely, I would suggest he looks elsewhere. The reason they want that is obvious. As a subcontractor, he assumes all liability for his actions. He can be "let go" at any time without recourse. He will not receive any insurance benefits. He will be responsible for his own witholding taxes and insurance coverage. He can be sued in the event of malpractice of any type. His amount of paperwork will triple. His headaches will quadruple. Best of luck to him if he takes it... I'm sure his talents could bring him to a much better offer.

Answer 2

Being a LLC would keep him from being personally liable for anything that happens as a sub contractor. I can't imagine why the company offering the sales position would care one way or the other. Either way (LLC or not) he would get a lot of tax benefits. One advantage to being a subcontractor, he could take other positions with other companies at the same time, since he is not an employee of that company.

Why don't you just have him ask the sales company why that is required. You can guess all day, but they may have a particular reason.

Answer 3

They don't want to pay all the tax on him. IE: SS, Unemployment, Etc. Let me give you the bottom line. Yes, he will have good tax advantages but only if he makes very good money.
(OVER 100,000 Year) Otherwise, Forget it. What he will want is a S-Corp. Talk to a accountant. The reason I say over $100,000 is he will be paying in ALL of his social security. It's 15% off the top plus all other tax. It doesn't pay unless you make big bank. He could have all the tax advantages and still be an employee if he had expenses doing that job. Thay just don't want to pay it.

Answer 4

If they pay him as an independent contractor, they are not responsible for any taxes or benefits. However, if he forms an LLC, he can get deduct a lot of business expenses, but the lack of benefits would trouble me.

Answer 5

It's so your husband won't be an actual employee, and they have no obligation to him, including benefits, taxes or anything else. It means he can work for them, and they can not pay him, and his only recourse is a lawsuit. He has no employee rights, since there is no real employer/employee relationship.

Your husband would be a complete fool to follow this course. All the advantages are for the firm that wants to screw your husband.

Answer 6

If they pay him as a contractor, they will not have to pay employment taxes for him nor offer him any form of benefits--medical, retirement, vacation, sick pay, education, worker's comp, etc.

They may pay him a little more but your husband will pay his own self employment taxes (15.3%) and will have no unemployment protection nor other benefits.

Answer 7

It will save the company money !!! They know what they are doing by wanting him to do this. They see it as a huge benefit TO THEMSELVES !!!

It will bring about tax advantages for him as well but he will most likely now have to get hos own insurances and they can be spendy.

Answer 8

They do not want him as an employee. Employee status usually include the following:

1) Benefits: including medical, dental, insurance, car
2) Bonus eligibility
3) Performance reviews, merit increases

Answer 9

contractor usually make more money
most likely the company doesn't want to offer him medical insurance and stuff like that

Answer 10

this way he is responsible for his own taxes and his own health care. it cuts down on the employer having to pay workmans comp claims at a high %