I'm leaving this shop...help

[Bobbie]

Hi Everyone,

I've been searching for help and just don't know where to go. I'm an independent contractor, at least when it comes to paying taxes for me he says I'm independent yet he tells me when and where what and how much, etc. I want my client list. Some clients came because of the owner's shop but most I've developed since starting there. The owner will not allow me access to the records and says he will sue me if I contact any client. I've been here for three years and just do not feel this is right.

Thank you. Help.

Bobbie E.

[Particentral]

If he is treating you as an employee, but paying you as an IC, then tell him that as an IC the clients that you do all the time are YOURS and he will give you the list or you will report him to the appropriate labor enforcement bureaus and the IRS. Make SURE your taxes and paperwork are current before doing this. If he still doesnt give, then move on or sue. Those are your choices. BUT as an IC the list is yours. YOU Should have a copy.

[Bobbie]

Thank you!

Thank you so much for your advice. I've just been beside myself not knowing what to do. I do not want to sue nor be sued. My taxes are in order--Thank God. He is changing shop rules and now charges rent based on our sales so the rent changes weekly. This is sort of like a beauty shop where we rent stations. Probably all is legal. He does not encourage us to give him a 1099 form. Says he'll work with us. I just need to move on to another shop where I can receive more plus have my choice of taking a day off once in a while.

Would I be considered an employee then?

Are clients who call the shop and are then assigned to me considered his client list or can I contact them when I leave. Are only the clients I brought to him 3 years ago considered my clients? He says all clients I've groomed belong to the shop and I am not allowed to contact any.

I've been afraid to leave without any business to follow.

Bobbie

[Ann221]

I hate to tell you this but if you are working in a shop it does not matter if you are IC or not the clients that come there belong to the shop unless those clients came with you when you first took the position to work there, you would not have a leg to stand on in court about this unless you have something in writing from the shop owner that if you leave you can take clients with you. If I were you I would move on and cover your butt next time so you don't have the same problem.

Good Luck !!

[Admin]

You are in the midst of a muddle.

This is a long topic but here are some key points.

You are only a 1099 (he gives to you) IC in most cases where you rent space/table, have your own phone, advertise yourself for clients, carry self employment insurance for your business, sometimes you even need a local business license etc. Every state will vary on some details. If the landlord contracting you collects funds and then gives funds to you the landlord must file a 1099 to you and with the IRS.

You say your taxes are in order, and I hope so, but you should have filed a 1040 long form, Schedule C and Schedule SE (assuming you are a sole proprietor organization) in most cases you must show your profit/loss as IC - business owner, and you pay double FICA/Medicare each year and appropriate state taxes for a self employed person. If you didn't receive a paycheck with deductions from him, then yes it appears you are an IC, self employed, and you must pay these additional taxes and use the appropriate tax forms.

Now considering the extra taxes and duties were shuttled over to you, and probably not legally since you certainly sound legally like an employee to me, there is only one party who has been benefiting from the present arrangement, and it ain't you. But remember, this is pretension. You have accepted 1099 IC payments to you, and even if you filed taxes correctly, are your licenses in order as a self employed person, and some states have plenty more requirements, even state licenses for anyone IC.

This is the muddle and what do you have to gain?

The business owner in your case, and others, don't make the laws whether you are an IC or employee. Owners and IC's must comply with laws. It's rampant in our industry that actual employers declare what are really employees to be IC's just to transfer employee tax burdens onto IC's, and yes, 99% of the time, the IC's are really employees. IC's actually need to get about 70% commission to earn the same net as a 50% EMPLOYEE after you account for the related self employment costs of being an IC.

If indeed the business owner is really an employer, the clients belong to the business owner. Did you pay for the advertising, licenses, other overhead to run the business, and I mean directly, that is key? Do you own the business name? Probably not, he has more going on his side in this setup and so he wouldn't have a hard time winning that one, but he will almost certainly lose with creating confusion between IC and employee, indeed!!

The local, state and federal government hate muddles like this and they look to more simple evidence and then the IRS comes along, as well as state officials in some cases.

If you want to stay there for some reason, become a real IC, rent a space, have a contract, get your local licenses, use your own phone, advertise yourself and those are your clients. Otherwise I would move on and keep your face out there and hope that word of mouth and even a picture of you in your ad will attract your present pet owners you serve.

Make sure you have filed your taxes correctly in the past, and that you do in the future. If you are IC think of yourself as self employed and then learn all the extra taxes you must pay, the filings you must do, sometimes quarterly, the licenses, the insurance and because you have all of these extra expenses make sure your fees account for them.

It's true that some IC groomers overlook they MAY have to file 1099-MISC to the business owner contracting them. If you pay over $600 year in rent for your space/table and the business owner is a sole proprietor, yep, you must deliver a 1099 by January 31 of each year to the business owner and file a copy with a 1096 with the IRS. Check your state laws as well. LOTS of IC's forget to do this.

Percentage rent can be legal but is usually for IC's, true one's. There absolutely must be a contract demanded if you do not get one. This is complicated and I won't go into this further here. That is a long topic. I would never mix percentage rent in with an employee basis, it is definitely for true IC basis only and you need a "contract" attorney to help review the contract INDEED.

You seem to know this, but for those reading the board I add this info. The hard fact is the government holds both parties responsible to know the difference between employee/employer/IC etc. You cannot say "he said this" and get off the hook. Both parties are responsible to know what is legal and to follow the law. Never trust point blank what a business owner says about your IC status. There are plenty of attorneys and small business accountants willing to help and the IRS has publications on this at their web site, and then there is the SBA, SBDC and SCORE to help IC's. So my point again is, point blank to you, I am sorry you are going through this but here's your chance to get it right and be secure and it's been a good lesson. That business is being run "at risk." That's stress, we all have enough stress working with pets and their owners. Find an appropriate legal setup and enjoy the peace of mind.

[gonegrooming]

question for stephen

Okay let me get this straight. I have a lady that does rent a table space at my salon. She had a problem with her building so she started renting from me back in July. Is she supposed to give me a 1099 for the rents she's paid to me during the year? I have an I.C that I give a 1099 to but was just going to put the rental monies down as income on my taxes. I'm sure she has no idea she's supposed to give me a 1099. Is this something I should worry about.?

Stephen: Rules for 1099 are many. If you are a sole proprietor then almost certainly yes, she should be giving you one, if you were a corporation, no. Now should you worry? No. You are not required to provide copies of 1099's given to you to the IRS. It is just a way for the IRS to track who is getting some types of income without withholding. Of course, if you don't declare that rental income then you are evading taxes. It's best to identify the type of income to the person preparing your tax returns. Some income is "passive income" and sometimes it is taxed or claimed differently that might to be your advantage.

Another 1099 that groomers forget to file, when applicable, is the 1099-INT for interest. Not finance charges, which are not interest. But if you borrow money, especially from individuals, for your business and you paid them $10 or more in interest during the tax year you are supposed to provide the 1099 INT to the individual, and file it with the IRS via a 1096. There are exceptions here, this is usually interest paid to individuals, not interest on bank loans...check out the 1099-INT instructions with the IRS, or ask your bookkeeper.

[mylady]

I hate to tell you this but if you are working in a shop it does not matter if you are IC or not the clients that come there belong to the shop unless those clients came with you when you first took the position to work there, you would not have a leg to stand on in court about this unless you have something in writing from the shop owner that if you leave you can take clients with you. If I were you I would move on and cover your butt next time so you don't have the same problem.

Good Luck !!

It does matter, because as an IC she is her OWN business and therefore the clients belong to her. As an IC the clientele that she did on a regular basis is HERS, BUT most salons that have "IC"s are not doing it legally. She should be able to set her own prices, schedule, etc. There are a lot of rules the IRS has and it sounds like he's breaking most of them. He'd be the one in hot water if the IRS found out (as long as your taxes really are okay)

[25yrsofclips]

If you truely want to leave run a big ad that says " Are you looking for me? " with a picture of yourself and where your working then. As a business owner for 27 yrs I don't believe we own the clients. They should be able to go where they choose. If any customer ever had asked me where a particular groomed had gone when they left I would have told them. I would not however have handed over a copy of my customer files for the groomer to take with them.

[celebpet]

We had a long drawn out discussion in grooming school regarding IC and 1040 employees. None of it simple or clear in my own opinion since its going to vary from state to state regarding certain areas, the only thing that is concrete is the federal side of taxes regarding how they have you employed. It is to my understanding that a lot of shops come in and take advantage of people by getting them to be a 1099 IC employee so they can escape a lot of taxes on their end. The reality is you got them by the N-Ts so to speak if you want to press the issue.

My recommendation would be: consult a local attorney. For a couple hundred bucks you can get all your answers, know how to move forward and be better informed the next time you sign on for another job.

I know attorneys catch a lot of flack and are the pun of many bad jokes, but when you need one they are their for you even if things are stacked against you.

[Randy LaFoy]

Just a thought fur wisedom

Listen 2 celeb, get yourself an attorney & get the real skinny on whats-what.

If you don't it not worth the trouble that can come with going off half cocked.

I know of other groomers that went out on their own & wished that they hadn't took the client list with them.

Each state is different about being & IC.

Just a thought

[groominshuman]

Did you sign a no-compete with a statement regarding taking the clients? Sounds messy and complicated. I employ my girls and that is what the prefer. I seems to work well for us. Good luck. PS. The add is a great idea. LoL

[cindi]

I agree with running a ad that is a great idea. If you could get the clients phone numbers & address what is wrong with sending them a thank you card for trusting you to groom their pet. Explain that you have loved grooming their animal but have decided to spread your wings and open on your own & to watch for your ads. Then make up a ad and put up flyers in the vets office, pet food store, dog park etc etc

[Helly]

It does matter, because as an IC she is her OWN business and therefore the clients belong to her. As an IC the clientele that she did on a regular basis is HERS, BUT most salons that have "IC"s are not doing it legally. She should be able to set her own prices, schedule, etc. There are a lot of rules the IRS has and it sounds like he's breaking most of them. He'd be the one in hot water if the IRS found out (as long as your taxes really are okay)

Actually, it DOES matter. If she's an IC she should have a contract that states who the client list belongs to. If she doesn't have it in writing, it doesn't exist, and the business may very well own the client list, not the IC.

And, as Stephen pointed out, the government holds BOTH parties responsible. "I didn't know" is not a defense. You have to be sure all your ducks are in a row before you blow the whistle, or the hot water could splash on you, as well as the business owner.

[dogmom]

Can you hand out business cards to those customers. look them up in the phone book, send out a mailer to that general area. Put fliers on mailboxes. Most customers live in the general area. Try and tell as many as you can while your still there.When I left my job the receptionist gave the customers my phone number.