if you have an ein and work for someone, can you hire someone under you to do the job you are being paid to do?

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if you have an ein and work for someone, can you hire someone under you to do the job you are being paid to do?

I’m a secretary attempting to start a employment agency that employs part time
employees to assist with clerical services. I trained a lady for my position. I
pay her out of the salary i receive. I have an EIN and have been with holding the
correct amount of taxes. Recently i was advised that i can not do business this
way. Is this correct and if so what steps must I take to proceed with this
business?

Asked on April 30, 2018 under Business Law, Maryland

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

When you are personally paid to do something as an employee, you cannot legally subcontract out your work. But you can be a contractor and subcontract out. To put it another way: if you receive a W2 and have payroll taxes taken out of your salary and/or receive employee benefits (insurance, vacation or sick days, etc.), this is illegal, because those taxes and benefits are based on you personally doing the work. But if you get a 1099 and are an independent contractor, you can hire people to do the work for you (as least so long as your contract with the employer does not specifically prohibit his), since there are no payroll taxes and no employee benefits. So the answer is to form an LLC (which helps show/prove you are an independent contractor), contract to provide the work as an independent contractor (and not as an employee), then hire whomever you like to sub the work out to.


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