In this episode of Our Business Shenanigans, hosts Jen Rodgers and Nicole Cobb delve into the critical differences between subcontractors and employees, emphasizing the importance of proper classification to avoid costly mistakes. They discuss IRS guidelines, the implications of misclassification, and provide real-world examples to illustrate their points. The conversation highlights the need for small business owners to understand the legal distinctions and operational controls that define each role, ultimately aiming to protect their business and ensure compliance with labor laws.

Takeaways

• Misclassifying workers can jeopardize your business.
• Employees have specific rights and protections under labor laws.
• Subcontractors operate independently and set their own schedules.
• The IRS uses behavioral and financial control tests for classification.
• Invoicing is a key aspect of subcontractor relationships.
• Sole source of income indicates an employee relationship.
• Training and controlling work methods suggest employee status.
• Non-solicitation agreements may not be enforceable with subcontractors.
• Understanding the distinction is crucial for small business owners.
• Subcontractors are essentially their own business owners.