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Category: Business Law
Satisfied Customers: 4633
Experience:  23 Years business & securities law, NY and FL bars. SEC all states.
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Complicated situation

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I am in the midst of a confusing situation. Background: I am a Pharmacist who was recruited by a colleague of mine whose business, which I will name as "RX" provides pharmacy order entry services online (via internet) to hospitals which do not have 24 hr pharmacy services.

The question is this: Am I a contractor or an employee in this situation?: My colleague says I am an actually an "independent contractor" for "RX" and my services with her company are voluntary and there is no contract between myself and her company so I file the W9 form. However my spouse said according to the IRS definitions that my colleague is acting in the capacity of an employer bc she issues my paychecks w her company logo; she established the original service contract with the hospitals; she set up my computer software so the business can operate; she defined my hourly pay rate, and therefore she must hire me as an employee bc of IRS tax codes even though she does not want to define herself as such.
If you so consent, she can have you as an independent contractor, and still pay you personally with her corporate checks. She must not withhold anything from the checks. You are a sole proprietor.
Customer: replied 7 years ago.
She is not withholding anything in paychecks like you mentioned, however according to IRS tax terminology, is she still acting in the capacity of an employer, bc she is doing the scheduling, defining my pay rate? Will IRS reclassify her company at a later point in time as an employer despite our agreement. My spouse's company attorney said that IRS defines the terms of who is acting in capacity of employee versus indepent contractor. pls verify.

Your spouses attorney is technically right but not for the same thing that is happening here. If the parties are in dispute and there is a tax liability issue, the IRS will define who is an employer and who is not. But where the parties agree that an IC relationship exists, then the intent of the parties prevails. I don't care how much the other party helped to set up the business.


This same issue arises in workers comp disputes, and in unemployment comp disputes. Worry not. The relationship is legal so long as tax is paid on income by somebody.

Customer: replied 7 years ago.
Bc I am sole prioprietor bc of this mutual agreement, does this open the door for unlimited liability? I am now open to direct lawsuits from the patients, the hospital that hired her company, and her company herself? Do I need to apply for an LLC or PC to reduce risks? she said that she has a $3 million malpractice insurance plan that specifically covers 3 independent contractors, including myself, and I verified this with the underwriter of the insurance United Health insurance.
Well it seems to me that she has taken care of this eventuality. Is it a good idea to incorporate anyway? Sure.
Customer: replied 7 years ago.

Last question: if I then become an LLC tomorrow, and I keep working for my colleague as described above but I tell the IRS that I am independent contractor is this OK for me?

You are not telling the IRS anything. Not at this time. Whether you are an LLC or a Corp, you are an ID. If you become a Corp you can apply for S Corp status and pass thru the taxes. Do you have a good CPA? Consult with him.
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