I am currently a W2 employee and I am seeking some guidance on how can I convert to a S-Corp and work at the same client. Please read below for more details kindly answer my questions.
I am working as a w2 contractor through a vendor company (Company 2) for client (Client1) in California and the client has mandated that all the vendor companies have to do business with them through a primary vendor (Company 1) to handle their vendor management. So the structure is Client1 > Company1 > Company2 > ME (I am a W2 contractor with Company2) and I have been working at this client for more than an year.
I recently setup an S-Corp incorporation and I would like to do business directly with the client (Client1) through the prime vendor (Company1). However the client and prime vendor expressed a concern that there could be an issue with the IRS and whether I would qualify as a corp-to-corp based on being a W2 worker previously and doing the same job. They feel that based on this I would most likely not qualify and IRS would see this as a mis-classified worker and the Client and Vendor company (Company1) would be liable to pay the fines associated. Below is the IRS website link for information on IRS guidelines for Independent Consultants:
Below are some of the questions that come to my mind:
1. Is this a valid concern as I am not a W2 contractor for either the client (Client1) or prime vendor (Company 1) and if so how can I work around this problem.
2. Can I work as an s-corp through another vendor company to do the same job - such as - Client1 > Company1 > Company 3 (another vendor company) > ME-INC (Me as a owner of a S-Corp)
3. Or can I transfer company ownership to my wife and work as a W2 employee of the S-corp owned by her such as Client1 > Company1 > WIFE-INC (Transfer the S-corp ownership to my wife) > ME-(I working as an W2 contractor of the S-Corp now owned by my wife)
This is very important and I would really appreciated if someone can answer my question and guide me through.