LLC Sub-contracting money and tax question


1

Essentially, I started an LLC about 6 months ago. I have worked pretty closely with another developer, but so far have yet to pay him. We are developing a product right now and I have agreed to give him a percentage of sales (after apple's cut). This is all in the US. I'm trying to make sense of when I'll need to have him complete a W-9, and whether I need to fill out a 1099-MISC. From what I have read here and on the IRS website, (this page http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Forms-and-Associated-Taxes-for-Independent-Contractors ), it sounds like I have to have him fill out the W-9 and then fill out a 1099-MISC. One question I have is how often do I have to fill that form out? The first time I pay him more than $600, and every time after?

We are going to start another project, and on this one he would essentially work for an hourly rate, which would be paid to my company, and I would then filter that amount to him. Are there tax implications here I should be thinking about? Do I need to filter some off the top to pay for taxes on the amount coming in? Is this even the best way to approach this situation?

LLC Payments Tax

asked Feb 15 '13 at 02:13
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Livingtech
106 points
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1 Answer


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One question I have is how often do I have to fill that form out?

Once a year, it has to be submitted by the end of January, aggregating all the payments made in the previous year.

Are there tax implications here I should be thinking about?

It sounds like regular employment.

I suggest you spend some bucks on a professional consultation with a CPA and maybe an attorney. You can get half an hour attorney consultation for as little as $30 - check the LegalZoom plan, or similar.

answered Feb 15 '13 at 04:46
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Littleadv
5,090 points
  • What do you mean it sounds like regular employment? Like these are the same types of issues regular employers have to deal with? I am not ready for that! – Livingtech 8 years ago
  • @livingtech IRS may argue that he's in fact your employee. If so you'll be liable for payroll taxes. You didn't provide much information here, so its hard to tell if such a claim is viable in your case, but it is technically possible and occasionally happens. Especially if the partner complains to the IRS (for whatever reason, if you get into a fight or something). Better arrange a proper partnership, IMHO. Talk to a professional adviser, I'm not a lawyer and not a tax adviser. – Littleadv 8 years ago

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LLC Payments Tax