What legal documents or type of business licensing do I need for a service oriented business with independent contractors?
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What legal documents or type of business licensing do I need for a service oriented business with independent contractors?
I am starting a business from home that sends a group of instructors to different schools for a weekend training session. I will not have the same instructors at all events, as they will be scattered throughout the country. Some may only work for me once, while others will travel multiple times. This session also serves as a fundraiser to the schools hosting the training sessions. My questions are, what type of business licensing do I need? And, what kind of legal contracts and tax forms do I need for my contractors?
Asked on June 18, 2009 under Business Law, Georgia
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
1) In order to avoid liability, whether for unpaid debts or business disputes or injuries/accidents caused by people in your employee, you need to set up either a corporation (probably an S-corp) or an LLC. That way, your business is a separate legal entity and your own assets are not at stake.
2) You will need busines insurance, especially liability insurance and an umbrella policy.
3) You should have contracts with your contractors/instructors identifying them as "independent contractors" who pay their own taxes and who cannot bind or make decisions on behalf of your company. You will then pay them their full pay for their services without withholding, and at the end of the year issue them 1099 forms. The alternative is to put them on payroll, which means you'd have to get mixed up with withholding, workers comp, etc.--much more complex.
4) You will need to check the regulations in EACH state and each district on whether training providers like you envision need any sort of advance approval, qualification, registration, etc. I am an attorney in the education industry and I can assure you that each state and each district can have very different rules for training or other events provided on site.
5) You'll need contracts between yourself and your client schools spelling out what they owe, how long they have to pay, what expenses (travel, meals, etc.) they pay for in addition to the basic cost of the services.
6) You may also need to be registered with districts as a provider in order to be paid by them.
Get a lawyer who can draft an LLC or corporation agreement for you, as well as provide you with some contract templates you can adapt. Set up a separate business account or accounts, so you do not comingle your personal and business funds. Get some insurance quotes once the businiess is set up. And contact the administrative offices in some potential customer districts, to start getting a sense for what kind of paperwork you'll need to do with each district.
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