I have an employee who has been with me a couple years. He has been extemely valuable to me and I would like to reward him better than I have. Unfortunately I,m a better landscaper than I am a businessman. I have a ton of work but don't make enough to give him a decent raise, yet I don't want to lose him. So here is my idea. I have ~50 residentials that receive regular maintenance but are not under contract. I want to shed the mowing aspect, but not lose the customers. I want my employee to set up his own business and take over these 50 mowing jobs. He has been doing them already so the customers would notice no difference except a price change perhaps. I would rent enough equipment to him to run as a solo op and require him to be legit and pay for taxes and insurance. I would rent him office space to facilitate the process,but billing customers etc. would be his responsibility. He is contracting his services directly not an employee or sub of mine when he works on those places. I still have contracted commercial work so I would keep him and the equipment 3 days a week. The rest of the week he would have off to run his solo op and I would focus on more profitable work than mowing. He would rather run a mow only business so he would turn all the profitable "extras" over to me. It looks like a win/win. He would become a business owner and I could pay more for his part time (no overtime). I save significantly in taxes and insurance, receive rental fees and a finders fee for his first 50, and step up to landscaping instead of mowing. You tax experts, does this work for the IRS. Do you see red flags, am I inviting an audit?