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  • Do I need a business license if hired as an independent contractor?

    I was offered a job in a pet store as an I.C. Here's the details they gave me I need your opinions about this.

    I was just offered a job as an I.C. But something doesn't seem legit. Here's the details they gave me.
    1. 1 year contract
    2. File my own taxes
    3. Get grooming insurance
    4. Set my own prices
    5. Set my own hours
    6. Use my own phone line to set appointments

    Here's where it gets shady..
    7. 60/40 commission split
    8. $250 if i work 25 hours a week.
    9. They collect all payment.

  • #2
    But whose clientele are you grooming? That's the biggie that nearly all of these employers overlook. Except for they collect payment those look pretty standard. But if they are giving you the clientele to groom because they are not grooming their clientele, IRS can reject that status if they like on that basis alone.

    For example a groomer owner was grooming 8 a day but had big enough clientele for the business to do 20 a day. She hired other groomers to do the extra 12 a day she could not personally groom. The others had their own insurance, phones etc, everything, but the IRS told her if she has groomers doing pets she could not personally groom in the same day, those groomers are employees, period.

    So many owners don't know about this ruling, we reported years ago here and I read the IRS determination. You can have all these little things like you stated, but if you are grooming someone else's clientele, nope. Also the $10 an hour for 25 hours, what? I thought you got 60 40, is that a minimum? They collect payment, that's not good either, so just saying if you resolve those, but still you are grooming their clientele, nope. This clientele thing is the one where nearly everyone gets caught.

    Also remember, you must meet state law. Many states have passed laws far more strict than the federal IRS on IC. Usually the IC where it is legal is renting a space and grooming their clientele, and there is no commission or pay coming from someone hiring you. You collect money from YOUR clients, and pay rent for the station or dept you rent.
    Most questions regarding GroomerTALK are answered in the Board Help Talk Forum. Thanks for coming to our community a part of PetGroomer.com https://www.petgroomer.com.

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    • #3
      They never had a groomer do they don't have a clientele. Does that mean it will be my clientele?? I have an interview with the district manager on Friday to look at this contract and check out the grooming room. I want to bring the IRS SS-8 form with me and make them fill it out while I wait, can I do that? Oh and they said I have to at least work a minimum of 25 hours per week to get $250?? They weren't real clear about that so I don't know of that would be incase I don't have any dogs all week or if that's on top of my commission. It sounds shady to me and I want to do it legally.

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      • #4
        Hmm. Lots of holes here. You cannot put limits of how much another BUSINESS (you, you are self employed if you are IC) and tell them how much have to work. You get your money FROM YOUR CLIENTS, not them. This is not even close to a REAL IC arrangement. The closest way it would be is you rent the space, run it all yourself, advertise for clients, and their clients could choose to use your services. Yes you have a separate license as a business according to the laws there. All this mumbo jumbo because they don't want to pay employer taxes on your earnings, OMG wake up business owners. Just add that cost to your grooming prices owners, and stop doing this to groomers.

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        • #5
          So true. To save a few bucks per groom thousands of business owners risk their businesses making groomers IC that are not really. I have had some owners out there have their accountant call me and tell me yes it is legal. After a brief call not one felt the same thereafter...they didn't realize the ownership of the clientele. To the OP, the contract needs to state who owns the clientele that they have in their business already, or that walks in to their place and finds you. But this 25 hours minimum etc, no way is that an IC relationship. The contract you are talking about should be a RENTAL contract, RENTAL of a dept, space or workstation (and again there are state laws that vary and even that situation may not be ok by state law anymore).
          Most questions regarding GroomerTALK are answered in the Board Help Talk Forum. Thanks for coming to our community a part of PetGroomer.com https://www.petgroomer.com.

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          • #6
            Technically, your "rental" to them could be construed as the 60/40 split if they write it in your contract as such, although this is not the normal way of paying a station rental. Usually a monthly fee is agreed upon. Also if you do the math, this is not beneficial to you financially once you factor in the additional tax burden you will be paying. I have worked as an employee for 60%. Ten percent extra as an IC will not be giving you financial gain. The part where it is a glaring violation is where they will be collecting all money and doling it out to you. You should be collecting the money for your services. I also agree with above post that they cannot set your hours, although they are thinly trying to make the 25 hours a week minimum come off as a "bonus", which is allowed.The other points above about the clientele are also valid, but you did not mention if you retain all client information or not so I can't comment on that. You should be getting your own key to the place and come and go as you please. You are also allowed to subcontract without their approval. This means hiring your own bather without their approval necessary, or allowing another groomer to cover you on a sick day. You need to read up at www.irs.org on the employee/IC information (and so does your boss!). As the deal stands, I would pass on this "opportunity ".

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            • #7
              the district manager wants to meet with me on Friday to look at the contract and have me check out the grooming room in the back. I don't have the money or knowledge right now to do this the legal way so I'm not gonna take the job unless they agree to hire me as an employee, even if it means ill only get 50%.

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              • #8
                Originally posted by mary1982 View Post
                the district manager wants to meet with me on Friday to look at the contract and have me check out the grooming room in the back. I don't have the money or knowledge right now to do this the legal way so I'm not gonna take the job unless they agree to hire me as an employee, even if it means ill only get 50%.
                We have done some studies in the past and even published that show taking 50% as an employee most often nets a higher income than getting 60% because that extra 10% is going to go to costs. Consider this. as an employee they will have to do deduct 7.65% FICA Medicare from the check's gross amount. That means they have to match and pay the same amount from their pocket as all employers do. Well when you are IC, they don't have to do that, and YOU instead pay 15.3% all out of your commission check, and then what about state employer taxes? Plus you have no workers comp insurance coverage if you get hurt on the job unless you personally buy that. So you are usually going to make more take home money when you work as a 50% employee than accepting 60% IC, and remember you don't have to advertise, pay for bookkeeper help to figure out those extra taxes, file a long form, maintain books daily, pay insurance etc. Depending upon costs, I have seen IC groomers need 71% commission just to take home the same pay as if they worked 50% employee!!!! And how many extra hours of work did they have to do whereas a 50% takes home zero work unlike the IC who has to daily bookkeeping, monthly and quarterly reporting etc.

                Thousands of employers offering IC positions (not renting spaces, I am talking about wrongly classified position) are doing NO favors, groomers are doing THEM favors. HOW IRONIC! Working longer hours with self employment duties, and often making less money! I often ask a groomer I know wrongly classified, "Putting aside the legal issue, why are YOU doing them such favors and even making less?" Makes them think.

                Now the only good reason "maybe" is that, in my town every shop is demanding I be IC. Yes that happens. What a sad state of the affairs of this industry when this happens. My next advice is, well perhaps you will have to take it, but keep records, pay your extra self employment taxes, but go to work for yourself on your own asap, housecall, mobile, or find a real station to rent if possible etc. Or consider working corporate until such time you can legally go out on your own. Thankfully most if not all corporate stores will never call you an IC illegally.

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                • #9
                  Originally posted by mary1982 View Post
                  I was offered a job in a pet store as an I.C. Here's the details they gave me I need your opinions about this.

                  I was just offered a job as an I.C. But something doesn't seem legit. Here's the details they gave me.
                  1. 1 year contract - weird
                  2. File my own taxes- normal for IC
                  3. Get grooming insurance -normal for IC
                  4. Set my own prices -normal for IC
                  5. Set my own hours -a must for IC
                  6. Use my own phone line to set appointments - your phone, your clients.

                  Here's where it gets shady..
                  7. 60/40 commission split- hoping you get the 60% and the clients are yours, still that is steep!
                  8. $250 if i work 25 hours a week. - Not sure what this means, need more info
                  9. They collect all payment.
                  - NOPE.

                  Of course it's up to you, but I have actually had IC groomers through strict guidance through my attorneys. My deal was simple, Clients the groomer attains independently are theirs, they interact with the client and they simply use my salon and shampoos etc to do the work, They pay me 20% of what they make. If I have a client Looking for a groomer through my advertising I will refer it to them for an additional 10%. so they get 70% I Get 30%.

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                  • #10
                    I agree ic relationships can get you into trouble unless truly an ic...so what is a fair hourly wage when competing with places that still do this and Pay 50 to 60% which is really outrageous if you are trying to run a business...


                    Sent from my iPhone using Tapatalk

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                    • #11
                      Originally posted by info347 View Post
                      I agree ic relationships can get you into trouble unless truly an ic...so what is a fair hourly wage when competing with places that still do this and Pay 50 to 60% which is really outrageous if you are trying to run a business...


                      Sent from my iPhone using Tapatalk
                      I've been on both ends and personally feel like it's exploiting employees to pay a groomer less than 15-20 in a established salon. I have a system that works out amazing for both me and employees. at their slowest I make a profit and at the fastest we both benefit.

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                      • #12
                        A landlord can absolutely set minimums for your hours. They can also dictate exact hours because of the relationship of related businesses. What they can't do is require you personally to be there during those hours. You may hire someone to work for you for any and all work. Commercial leases can have a lot of clauses. They're not as tightly regulated as the housing industry. You should check out the agreement Walmart has for their independent tenants such as subway. They dictate down to the type of writing they can use on their signs and who they can't hire as employees.

                        I'm in a strip mall and our hours are set per our lease. Every store in the strip has to follow a minimum because of the nature of combined shopping. Mine is a little more flexible since there is no retail and I negotiated in the beginning, but every store has to be open at least 6 days a week. Attorneys on both sides have looked at these leases. If you do a quick search of shopping center sample leases, you'll find that it's the norm with malls and plazas. In my plaza, the retail stores have to be open at least 9am-9pm 6 days per week. Any of the stores can exceed it, but there are penalties for "going dark" or "going dim." Most of the stores are open 7 days and a few are open at 8am and stay open until 10 pm, that is their choice. Food stores have a different set up due to the nature of their business.
                        It's typically set because a large anchor store often negotiates co-tenancy terms and can leave if the plaza doesn't have enough traffic.

                        The $250 could be legal if it was written as a penalty for violating the minimum hours of the lease. I do think 40% is too high in this situation, but that's something for you to do the math on. You mentioned a district manager. If this is a chain besides the big 2, PM me as I might have some more info on how others are doing it legally.

                        You do need to collect your own payment though. Even if they're just processing credit cards for you and you can take cash/check, there are issues. The IRS now requires payment processors to issue a 1099-k for all payments received in excess of 200 payments and $20,000. If they collect for you, your payments will reflect on their 1099-k. The only way to reconcile this is for them to issue you a 1099 for the payments collected and then paid out to you and then you're not a tenant, but a contractor. You should collect payment from them and record it as such so that you can deduct the rent expense.

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                        • #13
                          Originally posted by mary1982 View Post
                          I was offered a job in a pet store as an I.C. Here's the details they gave me I need your opinions about this.

                          I was just offered a job as an I.C. But something doesn't seem legit. Here's the details they gave me.
                          1. 1 year contract
                          2. File my own taxes
                          3. Get grooming insurance
                          4. Set my own prices
                          5. Set my own hours
                          6. Use my own phone line to set appointments

                          Here's where it gets shady..
                          7. 60/40 commission split
                          8. $250 if i work 25 hours a week.
                          9. They collect all payment.
                          Maybe you do. My friend is working as IC and is in big trouble as well as her boss. She doesn't have insurance which she should as an IC but they told her at the county she may not need a local license but if she worked under a doing business as she should have recorded it. You have to be grooming your customers you bring into the business, not someone else's clients.

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