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Tuesday, July 10, 2007

What's the Difference Between Subcontracting and Hiring Employees?

You should always consult with a lawyer when figuring out the difference between subcontractors and employees. However, the following are tips to follow when you are establishing a subcontracting relationship.

Qualify Your Relationships

The following is a list of requirements for subcontracting relationships. Check the IRS page for proper details, but this list represents some things you should look for when setting up subcontracting situations.

1. Subcontractors should own their own tools/equipment.

2. Do not provide subcontracting partners with laptops, protocol analyzers or anything else that would be expected of someone that works with network integration or other computer services.

3. Give subcontractors control over their work. They should not be treated like regular employees.

4. Give them enough clients.

5. Make sure subcontractors can sustain a loss.

6. Any subcontractors you use should market to the public or have a public telephone listing.

7. Don’t pay subcontractors by the hour.

8. Write the check to your subcontractors’ company and not them individually.

The Bottom Line About Subcontracting vs. Hiring Employees

Working in subcontracting relationships means following many rules. Make sure you pay close attention to detail when setting up these types of partnerships.

Added By: Joshua Feinberg