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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12646
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I own a small law firm. I would like to take on a new employee

Customer Question

I own a small law firm. I would like to take on a new employee but would like to have an alternative arrangement of compensation. The lawyer would take a percentage of each case, making him a contract worker, but I want the person to be on our payroll so that he is not hit with sole proprietorship taxes. Is this possible?
Submitted: 8 months ago.
Category: Tax
Expert:  Megan C replied 8 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

Yes, this is entirely possible. It's similar to how salesmen are paid by companies.

Megan C :

However, you need to make sure that you adhere to minimum wage laws and ensure that they are at least making minimum wage.

Customer:

So does that mean I have to track hours?

Megan C :

An attorney would typically be tracking hours anyways, because of how they bill out...right?

Customer:

Normally yes. But we take flat fees

Customer:

for projects

Megan C :

I worked at an accounting firm, and they took flat fees and we still had to track our billable hours for efficiency purposes

Megan C :

Made sure we weren't just goofing off on the clock :-)

Customer:

I see.

Customer:

But if we didn't do that, how do we ensure minimum wage?

Megan C :

I'm sure though that any good attorney would not work if they were making less than minimum wage, though so you should be fine

Megan C :

That's just the only pitfall that I see

Customer:

Because I'm 100% sure he would be getting more than minimum wage anyway

Customer:

ok

Megan C :

If you find an attorney willing to take minimum wage let me know :-)

Megan C :

I could use them.

Megan C :

haha

Customer:

Great. so could you summarize how it normally works for a salesman?

Customer:

haha

Customer:

yeah, me too

Megan C :

Well it depends on the company and the contract

Megan C :

some work completely on commission

Customer:

ok, so this would be like working on commission?

Megan C :

and they have a "draw" that they are paid similar to a salary, but the draw is based on a certain level of sales

Megan C :

if they don't meet the draw, then they typically lose their jobs

Customer:

do they have a set base pay and then commission on top of that?

Megan C :

some do

Megan C :

Others are purely commission

Megan C :

But, you'll typically see someone with a low salary - like $20,000 a year or something and then commissions on top of that

Megan C :

but, that $20,000 is based on a set level of sales

Customer:

i see

Megan C :

You couldnt' just not sell anything and draw $20,000 without repurcussions

Customer:

so that's the way they ensure minimum wage

Customer:

i see

Megan C :

That would be how they would get around that, yes

Customer:

and this type of arrangement would work for attorneys?

Megan C :

I don't see why not

Megan C :

It's a similar thing

Customer:

so the employer still pays the payroll tax and other associated taxes, right?

Megan C :

That's correct

Customer:

so he can truly be an "employee" even with this arrangement? and even get other benefits like health coverage and stuff?

Megan C :

Yes, I do not see why not.

Customer:

just making sure. Thanks!!

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12646
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 8 other Tax Specialists are ready to help you
Expert:  Megan C replied 8 months ago.
Thanks, Johnny for your positive rating. Please come back and visit me any time you need a tax, finance, or social security question answered. It was a pleasure working with you today.

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