Judge Denies Freelancers’ Bid to Upend California Labor Law

[Peter1469]

Thanks for that perspective.

I am not commenting specifically on the full knowledge of what brought this challenge on or the intent of the judge but far too many people misuse the 1099 style employees. A contractor style employee was designed to use someone for services over the short term because the need was short term.
This is abused too often with low wage employees who only work at one location to avoid employer owed payroll taxes, workman's comp, benefits.... If you want to find these people then look at your local gym, your landscaper and other jobs that both parties have no intention of being short term.
The second abuse is people over 50 that become unemployed. People do not want to hire them because they are protected by age discrimination laws so they work as consultants for years for a single company as self-employed. This was a massive move of professionals after the Obama recession by people in their late 50s and early 60s that were not able to retire but also would not be considered for a job. They were suddenly in high demand as consultants. Many journalists are often contributors to only one media outlet and forced to sign no-compete contracts.

The problem is that they will probably just lose their contracts and no be hired.

[FindersKeepers]

Is LLC the best type of corporation for tax purposes? Do you avoid the double taxation?

I honestly don't know. I hope I don't have any issues because I'm self-employed, but you never know. Other writers are forming LLCs (individually and as groups) as well. I need to look into the tax aspects. Soon.

[Peter1469]

I honestly don't know. I hope I don't have any issues because I'm self-employed, but you never know. Other writers are forming LLCs (individually and as groups) as well. I need to look into the tax aspects. Soon.

I don't do that type of law, just checking. I know some types of corporations that the "small guy" uses you end up paying corporate taxes and then when you take your cut personal income taxes. Utley will know.

[Collateral Damage]

I honestly don't know. I hope I don't have any issues because I'm self-employed, but you never know. Other writers are forming LLCs (individually and as groups) as well. I need to look into the tax aspects. Soon.

An LLC is a passthrough entity, such that profit or loss flows through to the members. Any profit or loss is then taxed at your individual rate rather than a corporate rate.

I believe there are a few extra hinks to a single member LLC, but I do know that most LLCs opt to be treated as a Partnership rather than a Corporation because the taxing basis is more favorable.

An LLC provides some shields in the case of a liability situation.

*for informational purposes only, I am not an attorney.

[nathanbforrest45]

I am not commenting specifically on the full knowledge of what brought this challenge on or the intent of the judge but far too many people misuse the 1099 style employees. A contractor style employee was designed to use someone for services over the short term because the need was short term.
This is abused too often with low wage employees who only work at one location to avoid employer owed payroll taxes, workman's comp, benefits.... If you want to find these people then look at your local gym, your landscaper and other jobs that both parties have no intention of being short term.
The second abuse is people over 50 that become unemployed. People do not want to hire them because they are protected by age discrimination laws so they work as consultants for years for a single company as self-employed. This was a massive move of professionals after the Obama recession by people in their late 50s and early 60s that were not able to retire but also would not be considered for a job. They were suddenly in high demand as consultants. Many journalists are often contributors to only one media outlet and forced to sign no-compete contracts.

The problem is that they will probably just lose their contracts and no be hired.

When I started my business in 1981 using 1099 employees was the norm. My company audited invoices already paid and would split any recoveries 50/50 with the company paying the invoice. Then I would split that 50% 50/50 with the auditor that found the overcharge. Some were quite good and some found nothing and would quit. I supplied the tariffs and the work space and obviously the accounts to audit. They set their own hours and methods of auditing the invoices. I would file the claim, bill the customer and pay the auditor. This was, and still is to my knowledge the preferred method of employment in "Post Audit" offices. It is the same system used by real estate agents, hair dressers and a host of others. I ran my business like that for about 10 years when I switched to actually paying the freight invoices and auditing the invoices as they were presented. For that I had to hire qualified auditors and pay them a salary (I couldn't have them cutting back invoices that were correctly rated, collecting 25% and disappearing. In California I see I wouldn't be able to do that and I could never have started my business.

[FindersKeepers]

An LLC is a passthrough entity, such that profit or loss flows through to the members. Any profit or loss is then taxed at your individual rate rather than a corporate rate.

I believe there are a few extra hinks to a single member LLC, but I do know that most LLCs opt to be treated as a Partnership rather than a Corporation because the taxing basis is more favorable.

An LLC provides some shields in the case of a liability situation.

*for informational purposes only, I am not an attorney.

That gives me a start. Thank you. It sounds like I need to call our accountant. When I set up the LLC (pretty easy, actually), I was informed that I would have to file a state form annually, but it doesn't sound as if it will go to the IRS but rather to the state itself. Some sort of disclosure. Since I became an LLC only this year, I don't think it will affect my 2019 taxes. I won't have any employees.

[Collateral Damage]

That gives me a start. Thank you. It sounds like I need to call our accountant. When I set up the LLC (pretty easy, actually), I was informed that I would have to file a state form annually, but it doesn't sound as if it will go to the IRS but rather to the state itself. Some sort of disclosure. Since I became an LLC only this year, I don't think it will affect my 2019 taxes. I won't have any employees.

I believe you need to file an Annual Corporate Report, here it's $50 per member with a minimum of $300 each April 1. The ones that I deal with file Franchise Excise tax with the State, and a 1065 with the Feds, but on a non-tax basis. K-1s to the members reflect the portion that flows through to each and are used to file the individuals tax return, and that is where the taxes are paid to the IRS.

Have I confused you yet?

[FindersKeepers]

I believe you need to file an Annual Corporate Report, here it's $50 per member with a minimum of $300 each April 1. The ones that I deal with file Franchise Excise tax with the State, and a 1065 with the Feds, but on a non-tax basis. K-1s to the members reflect the portion that flows through to each and are used to file the individuals tax return, and that is where the taxes are paid to the IRS.

Have I confused you yet?

I'm glad you're helping me out. You've given me good info!

[patrickt]

My daughter ran a small hair salon. She worked there and rented chairs to others who were independent contractors. She got group health insurance that the contractors could buy if they chose and they all chose. They were responsible for paying their FICA taxes and income taxes. They set their own hours.

She was harassed out of the business by the government. She became an independent contractor and rents as chair from someone else who is harassed by the government.

[carolina73]

I think it's pretty easy to see the distinction between one who sells photos/articles to multiple sources, and one who works only for Uber. If Uber is taking a cut from the drivers, then the drivers are employees. Especially if Uber sets the rates, etc.

Freelancers are very different. Especially given that you don't need insurance to sell photos.

No. They can drive for Uber, Lyft, deliver pizza, deliver for grub hub... all in the same day. That is Freelance. If they throw a non-compete in front of the person or demand all his time then it is a different story. The kid that works the front desk at my gym is paid on a 1099. He is an employee of the club but the owner pays no payroll taxes , insurances or taxes on him. That is a abuse of the law and the kid.