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MDLaw
MDLaw, Attorney
Category: Business Law
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Experience:  Experience in business law, contract law and related matters.
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I want to start a business where I use a 3rd party vendor for

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I want to start a business where I use a 3rd party vendor for the product I sell. How do I protect myself from my sales people finding the vendor and doing it on there own
Submitted: 7 years ago.
Category: Business Law
Expert:  MDLaw replied 7 years ago.
Will these salespeople be your employees?
Customer: replied 7 years ago.
I would like to have them as independant contractors so I can work nationwide later. So they would be 1099
Expert:  MDLaw replied 7 years ago.
If you were going to hire them as employees, you could have them sign a noncompete agreement upon hiring them. However, if they are IC's, having them sign a noncompete would risk turning them into employees under IRS rules. Many small businesses get in trouble with the IRS because they hire people as IC's but in reality, they are treating them as employees. When the IRS discovers this or the individual complains to the IRS, you would be liable for back taxes, withholding, payroll taxes, large penalties, etc.

Here is a brief article from the IRS website which explains further the difference between an IC and an employee.

http://www.irs.gov/newsroom/article/0,,id=173423,00.html

See also Publication 15-A which can be found on the IRS website as well.

Essentially, if you impose demands on an independent contractor, they cease to become an IC since one of the key terms is "independent." As soon as you tell the person what they can or can't do, they automatically become an employee.

Because of this, you would would definitely want an employment attorney who specializes in contracts to review any agreements that you intend to have your employees or IC's sign.
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