Writing Good Contracts

Sole proprietorship at the moment. But I will be changing it to a corporation or LLC soon. This is particularly important because I want to create limited partnerships while still being protected from liability.

I'm not quite familiar with him at the moment. Hence why I'm first having a meeting with him and why I'm writing the contract. I will also be watching him very carefully. I will spell out a few rules in the contract as well and consequences of not following those rules, etc.

Not much. Just his time, basically. He will also be liable for any work that he does- that is, he will be a general partner. The plan is for him to get in easily so that I can keep control of ownership and high profits while still be protected by certain terms in the contract.

You mean making him pay for the lawyer? Huumm... that might be a good idea.... :scrachin:

Why not? I can certainly support myself with the business. Besides, growing the business is THE way to make things happen. I won't be able to create a business that support itself, myself, my wife, my kid and my partners without taking risks! You see... the greater the risk the greater the return.... and the greater the knowledge, the lower the risk, so in order to maximize return and minimize risks, one must be knowledgeble of the potential risks and systematically decrease or elminate the potential of such risks. One way to do this is by writing a contract. A better way to do this is by having it reviewed by a lawyer. An even better way to do this is by having a lawyer writing it for me. However, if the later is used, I must be fully involved in the process as some situations may apply more to me then to other of the lawyer's clients. So either way I must be highly involved in the process of writing the contract. Hence why I'm considering to write it and having it reviewed.

That's probably because I didn't SHOW you my business model in the first place, maybe...?

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How do you know this is the case with my business?

You see.... the reason why I need partners/employees is because I spend too much time IN my business as opposed to ON it. I'm certainly able to pay my bills with it. Right now, a couple of clients give me more then enough money to support my family. I currently have 4 clients and I haven't even started with the 4th yet. The 4th is giving me so much work I need the help of a partner.

Working full time, I make the following money:
At $400 a client, 20 clients maximum capacity: $8,000
With two partners, spliting 50% with them, at maximum capacity, with NO WORK from me other then management: $8,000

$8,000 with little to no work.... huumm.... sounds good to me....

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Currently I charge $30/hour, which adds up to $400 per month per client. Similar competitors charge $50/hour for work of less quality. With current capacity (due to retroactive work needed) I'm perfectly capable of making about $3,000 a month. I need about $1,600 to survive. So it sounds like it's perfectly possible for me to grow my business....

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Truthseeker...but on average how much exactly do you make? (after and before taxes)

 

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I'm currently not paying taxes, basically. I will have to "pay" them, yes... but I have so many credits that I will probably not need to pay anything for a while....

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Last month I made about $1,500 and I only worked about 60 hours the whole month, plus I gave a $10/hour discount to one of my clients. So... not bad for working an average of 15 hours per week.... LOL!!!

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so you only make $1500 and thats without paying taxes. and everything else is dreams and future ambitions...I see...

 

IOW, you know what you have to do to make money doing what you know how to do, you just don't know how to operate business-like when it comes time to account for your income-producing activities with respect to your your municipal, state and federal liabilities.

It sounds like you'd be better served taking the guy on as an independent subcontractor--giving him a 1099-Misc. at the end of the year, letting him be responsible for his own tax obligations--and not sharing your profit with someone who isn't risking anything up front to be able to share in the profits of your combined efforts (mostly yours) and doesn't deserve any more value from his effort than he's willing and able to personally contribute to your business going in.

Pain is said to be the master of education. Pucker up.

 

You're a sole proprietor. All income after expenses is subject to self-employment tax: 15.3%.

If you're taking after-expenses income out of the business, it's subject to self-employment tax.

Self-employment tax is payroll tax--Social Security and Medicare taxes. Payroll tax is the Federal government's money. Not paying payroll tax is a federal crime that will begin with civil penalties of late-filing and late-payment penalties and interest, but soon will escalate into felony tax evasion.

Each tax return you sign is it's own potential felony tax evasion conviction.

Feeling lucky?

 

Probably because I'm not specialized in law....

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What do you think I'm going to do?

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You're a sole-proprietor. You business's tax ID number is your social security number.

Any tax liability the business is responsible for places all of your personal assets at risk of loss to legal judgement(s).

Your house, your car(s), your personal bank accounts, your personal investments, your family's personal belongings, garnishments on your wages from employment (and your spouses if you file a joint tax return), future tax refunds, etc.

I'm still not seeing a terribly survivable viable business model going on there.

 

That might be in the US, but not here. Sole proprietors in Canada pay just as much as employees (well, less, because they have deductions...

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).

Oh God.... As I said, the rules down there are a bit different. I do have to pay CPP, which is a kind of payroll tax, I'm very much aware of that. And, of course, if I have employees I also have to pay payroll taxes. But if I only have independent contractors I don't need to worry about that...

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I don't think you know what the hell you are talking about.

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Well, DUH! As I said before, I'm planning to incorporate. Besides, those legal risks are only if I get sued.

But anyways... this is a waste of time. I think you forgot you are talking with an accountant....

 

Actually, I think YOU are wasting your time. If he's not going to be a partner NOR an employee - just merely a hired contractor - what's all the fuss about?

 

Ah. Okay. Never mind.

I forgot you were in the Great White North.

Still, your circumstance is the default position for newbie business startups in the U.S..

Valid words of warning still remain herein.

Carry on.Tuh tuh.

 

Umm, I speaking as a 14-year self-employed tax accountant.

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Take this tissue; you're a little wet around the ears.

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Shall we entertain the notion that you claim the authority of a professional practitioner of accountancy but display a cavalier lack of professional ethics by admitting to situational--perhaps habitual--tax evasion?

Just saying...

Speaking the truth you seek...

 

SURE! Let's hire an employee without doing a backgorund check! He might be a murderer, but who cares, RIGHT!?

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Really? Humm. Well, please tell me more.

 

Well, but you are in the US though. We have a whole tax act here of our own....

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Which tax evasion? This is the first time I ever earned any income, so I don't owe anything. Plus, as a sole proprietor, I pay taxes very much like an employee does. I just need one extra form. I don't know how it goes there, but here that's all that you need. Why do you think I'm evading taxes? I don't even know how I could possibly do that right now given that I have over $15,000 worth of tax credits...

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That's a very stupid approach since NO ONE has even mentioned background checks before. And what the heck does that have to do with a contract anyway????????????:bugeye: Those are TOTALLY unrelated issues! Sheesh!!!