Question about contracting out work

Hi. I have my own small web services biz & I am pretty happy with it. I spent several years building up a client base and making a name for myself.

About a month ago a large company approached me about coming on board, so I put my stuff on hold. I am still getting clients calling me however, so now I am looking for a solution where I can work with someone else on the freelance stuff while I do my full-time job.

I put out a call for local designers and got a decent reply. My plan is to have them sign a contract, either for a fixed time period or per job, and split the revenue. My wife is concerned about the tax implications of a arrangement like this.

Has anyone ever worked in a similar situation? What are the tax implications, if any, on my biz? Thanks in advance.

It’s not too difficult tax wise if you send them a 1099 form. Then you can report them as an expense. Also, I have found many accountants will talk to you for a few minutes at no charge because they want your business, so you might try that too.

Thanks, guys. I have a call in to my accountant.

You should be able to phone the IRS and check whether taking on someone will affect your tax payment or business taxation records. It depends on several factors as to what implications there may be (such as if you’re hiring internationally, whether their an employee of the business or just a freelance “contract” (as in outsourcing) and whether you’ll need to withhold a set percentage of their earnings or if they will be required to declare it on their behalf). I would recommend speaking to an expert on that kind of thing rather than just asking here as you don’t want to make a mistake and have the tax man on your back. :slight_smile: