Q: What is the difference between an independent contractor and an employee and what kind of documents do I need for each?
A: In the early stages of a business, many founders prefer to engage independent contractors or consultants to perform services. It allows the company to avoid implementing costly payroll processes and employee benefits and the company saves significant dollars that would otherwise have to be paid on employee-related federal and state taxes. In fact, it’s such a big savings that the IRS decided several years ago to crack down on improper classification of employees by imposing hefty penalties on the companies.
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