It is not so much a choice between calling someone an employee versus an independent contractor. Both the IRS and state law, as well as workers compensation cases, etc., have a series of "tests" or conditions which help business owners determine, given the reality of how thier jobs are performed, whether their workers are "independent contractors" or "employees". The tests do not consider the "name" given a workers (i.e., employee versus independent contractor) but focus on how the work is done, what control the employer has over the work, etc. These conditions/tests can be reviewed here and here for example. Where an employer makes a mistake regarding the classification of a worker as an "independent contractor" the employer may become liable for payroll taxes, workers compensation, unemployment insurance, and other payments that employers must pay for employees.
Employers do normally, however, have to pay workers compensation, unemployment insurance, state and federal employment taxes, and other register employee names with the state's child support bureau (in OH, actually, the child support registration must also be done for independent contractors - see here). There are also posters employers must put up for their employees, see here. There are also salary/wage payment laws which employers must comply with under the Ohio Revised Code, such as when payment of salary is due to employees.
The unique features of every employer to its employees or independent contractors as well as with its clients, particularly where a business can include injury to others, should have an attorney draft protective policies, contracts, and agreements that can protect the business and its owners from liability as much as possible. In addition, policies to maintain confidentiality of business practices, trade practices, and other matters should also be considered to protect against employees taking clients or valuable business information.
Assuring compliance with the multitude of taxing, employee, state, and federal requirements in addition to determining what legal policies, practices, and contracts an employer should have can be daunting and for a first time business owner it would be best to hire an attorney in their state to have that attorney walk the employer through these matters to help assure costly mistakes are not made.
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