LLC or S corp

Discussion in 'Starting a Lawn Care Business' started by tenderman, Feb 4, 2009.

  1. tenderman

    tenderman LawnSite Member
    Posts: 14

    I run a lawncare company with 5 employees and the company is an S corp right now. A fellow that I know told me to switch to an LLc and have my workers "subcontract" under me so I could get away with the costs of employing people. It seems like there's so much red tape in also letting someone go if there is a problem in a S corp (lots of paperwork). If they subcontracted under me then they themselves would have an opportunity to more tax breaks. Any thoughts or am I way off base?:confused:
  2. 1wezil

    1wezil LawnSite Senior Member
    from tn
    Posts: 535

  3. I believe you better talk to your lawyer or CPA about this, asking on here you can get a lot of bad information.
  4. JasonTX

    JasonTX LawnSite Member
    Posts: 14

    I have used both in the past with other businesses but I am not an expert and would not give a recomendation. I will tell you that you need professional advice.
  5. tenderman

    tenderman LawnSite Member
    Posts: 14

    all right thanks guys, I will do that. Just feeling it out. Thank you for your input.
  6. Dean of Green

    Dean of Green LawnSite Senior Member
    Posts: 254

    I believe if you have sub-contractors you can not supply them with the tools and equipment to do the work.
  7. 1wezil

    1wezil LawnSite Senior Member
    from tn
    Posts: 535

    Well you could have them buy there own weed-eater and blower and then just give them a few bonus checks for doing a great job and that could be a way to pay them back for there equipment they bought . oh ya I know you can not tell them what time to come to work ether when they are sub contractors but just tell them if they would like to get a free ride to work the truck is leaving at 8:00am :laugh::laugh:
  8. richonsa

    richonsa LawnSite Member
    from georgia
    Posts: 66

    The IRS has been known to redetermine taxes (FICA) on businesses that pay employees as subcontractors. Read the rules on the IRS website about this approach.

    J.A.G LAWNCARE LawnSite Senior Member
    Posts: 931

    you are looking for trouble doing that ...............they are not subs in anyway ...............
    your truck , your mowers , your time, noway to do it legal........
  10. Tommy Boy

    Tommy Boy LawnSite Member
    Posts: 220

    No way can you get away with that, may not get caught for awhile, but when, not if you do expect to pay big money. The IRS says you can do all you can to keep from paying taxes and as long as you error on the side of thinking you were taking a resonable deduction, then you have a civil penilty, but avoid or use fraud, then the Criminal investigators come by. The IRS is clear and has a 19 or 21 step rule about using 1099 employees or sub's. You have to answer yes to all of the questions, to be qualified. For example, I have an interstate maintenance contract we won on bid. I hired a crew in the area, the supply the equipment, the personnel, the expendables, and I only direct, not supervise the work. The nature of the work and time required to complete is in the contract. I handle billing, and in turn pay the sub who provides me with a TIN or tax payer ID number.

    For taxes He is 1099'd on the work and service provided. As long as he meets the contract obligations as specified he gets paid. I can not tell him how he is to acomplish the task, he is not an employee, so he is completely free to get the scope of the worj done as specified.

    You can use casual labor which you can pay upto $600.00 per year without a 1099. I use this for college and high school kids working part time.

    Don't over think this you are asking for a deep look by the IS and they will in most cases win

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