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The CTO of our company is also our software architect and gets paid for his work as software architect. All of this is handled tax wise by our CFO. Talk to your accountant.
It is critical that you, the business owner, correctly determine
whether the individuals providing services are employees or independent
contractors. Generally, you must withhold income taxes, withhold and
pay Social Security and Medicare taxes, and pay unemployment tax on
wages paid to an employee. You do not generally have to withhold or pay
any taxes on payments to independent contractors. If you are an
independent contractor and hire or subcontract work to others, you will
want to review the information in this section to determine whether
individuals you hire are independent contractors (subcontractors) or
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I think the fact that he is an Officer of the corporation may cause a few questions if you try to classify him as a contrctor if you were ever audited.Ofcourse there is actually nothing wrong with it if it meets the IRS test for a contractor and it is in the best interest of the company and your Corporate Bylaws authorize Officers acting as contractor for the company I would also draft an independant contractor agreement and a resolution reflecting the decision.They just may question it. How is he comepnsated for his duites as an Officer?
And why if you dont mind me asking are you a California C corporation? Visit our site and read through this page http://www.newwestbusiness.com/complicance__virtual_corporate_counsel and let us know if we can help you or you have any questions.
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A partner and I recently started a small corporation together. We are just getting off the ground, and don't expect to be making enough money to actually have any employees anytime soon. Nonetheless, we would like to hire one of the company's officers as an individual contractor for a one time job. Is this possible? Would we need to draw up a contract to avoid any issues in tax or worker's comp issues? Any similar experiences? We're a California C corporation if it makes any difference.