Just getting to the point where I'm considering taking on an employee or two. But I don't care to put up with all the current & emerging BS regarding 'my responsibilities' as an employer (I know I'm crazy... but I see a job as a mutally beneficial agreement that either party can walk away from when that ceases to be the case).

So I'd like to hire my 1-2 employees as private contractors.

Are there any legal troubles I can get into doing so?
Are there other legal ways to achieve the same end?

I believe there is a fine line between called an employee and contractor to the IRS. Make sure your workers know their status when hired. I only warn you because my wife was once hired as an employee but her company paid her as a contractor (without our knowledge). Come tax time we owed Uncle Sam a huge chunk of change that was unexpected since we thought she was an employee. Had to make a case with the IRS and in the end her company had to pay a load of fines for mis-catergorizing her and many other employees.

It is complicated. Some states have very specific rules when hiring employees. In my industry, they even limit who I can have on salary and who has to be a hourly worker. It really does depend on your state and what you do for a living. You may not even have the option.

Consult a lawyer.  As an employment lawyer this is one of the most common ways I see employers get into trouble.  The government has very specific requirements that have to be met to be considered an independent contractor.  



 

And there is no way for you to avoid "the employer bullshit". Everything changes when you hire that first employee.

Talk to a CPA or Attorney in your state.  You need about a 4 hour block of instruction on what is and "employee" and what is a "contractor".  If you hire them as contractors follow all the rules.  If you don;t the state and the IRS will "convert them to "employees" for you and send you a huge bill for back payroll taxes.  

With that said I am doing all contractors.  Even with the rules is much cheaper than having full time employees.  

No no no no no no no no no no no no no no no no.  One of the other reliable case generators are CPA's trying to play lawyer.  OP needs a lawyer who has practiced labor and employment law.    

 

My company recently changed us all over to 1099's.  Then they thought they were going to be able to tell us not to work over eight hours a day, and tell us when and where to work (we generally have several projects going at any given time), etc.

They must provide their own Worker's Comp, if they don't have it and get hurt on the job you are liable. If your insurance co. comes in for an audit and find out they don't have comp ins., they will retroactively nail you with the premium. Ask me how I know.

They must invoice you on their own invoice form. If it is a form that is provided by you, the IRS says they are your employees.

Talk to a good attorney. He will be worth his weight in gold.

I employed (for lack of a better word) as many as 45 sub contracted 1099 cable installers back in the '90s.

As a general rule, you can't do what you're trying to do. The people who wrote up the tax and employment codes knew people would try this.

no records so pay cash

You could get really screwed over by the IRS and FICA (social security) if one of your 'contractor' folks complains about having to pay both side of social security (self employment tax) and the IRS decides the folks are actually employees.

Look at what the IRS and your state consider 'independent contractors.'

You need a tax attorney before you need an employee. My opinion.

The IRS has a list of about 10 things that separate contractors from employees.

Miss any one and you have a retroactive employee.  

ETA: IRS

Went through this in the Flight Training biz.

The IRS and most states use the "direction and control" rule.

If the person working for you is under your direction and control, they are your employee.

Some of the factors you must take into account are these:

1. Is the worker required to do the work at a location specified by you?

2. Is the worker required to perform the work during hours specified by you?

3. Can the worker sub-contract the work to someone else?

4. If you are claiming that the worker is an independent contractor, does the worker have his own business license?

For example: If you want me to spray paint 500 metal cabinets, and you want me to do the work at your shop during the hours of 8AM to 5PM, Monday through Friday, then I am an employee.

If, on the other hand, you deliver the cabinets to me, and I do the spray-painting in my garage at hours of my own choosing, and return the painted cabinets to you after I am done, then I am probably an independent contractor.

Use common sense here, and don't try to weasel around the law, and you'll know what to do without hiring a lawyer.

Pay cash, problem solved