Thursday, November 16, 2006

More Resources

Typically, but not always, Fitness Professionals are compensated by 1099, contract labor. Which means they are NOT employees and are responsible for their own taxes. This will obviously reduce the business expense of withholding taxes, and will change your legal liability, so make sure you have consulted with your legal and tax professionals regarding each. You should also inquire about being ‘at-will’ employees and what that may imply in your state. ‘At-will’ directly relates to your liability for the individual as well as your obligation to them.

You will probably at some point have an employee on payroll, even if it is just a small salary for an assistant. In this instance, you are going to have to withhold taxes and pay in at certain intervals.

As an employer you’re required to withhold chunks from employee paychecks, plus you must pay other employer taxes -- and provide timely and proper reports to the IRS and various other federal and state agencies. It is imperative that you understand exactly what is required.

Employer tax responsibilities are so complex and handling them right is so critical that you want your accountant’s input on how you go about this. My recommendation is that you have their office to help you set up your employer tax system, whether it will be handled in-house by you, coordinated with an outside payroll service provider, or your accountant. Outside sources will handle the ongoing detailed paperwork for you correctly, cheaper and quicker than you could do it yourself. They are also extremely beneficial if there is a change in policy, which happens often, and you don’t have to bother with the headache.

Here are a couple of resources for you to check out (which will reinforce any information I have given as to why you want someone else to do your bookwork).

www.irs.gov

http://www.irs.gov/pub/irs-pdf/p15.pdf - The Employers Tax Guide. This you should probably have on hand for reference.

IRS FAQ – Questions answered regarding reporting tips, mailing W-2s, providing benefits, day care, tuition reimbursement and topics of that nature.

http://www.statelocalgov.net/ – This site is a directory of state, county, and city agency websites.

Also check with your local Small Business Administration. One of their main goals of this Small Business Administration (SBA) program is to help small companies create more jobs. They may offer classes and other help for employers. You can find more info about your local SBA by clicking here.

If you are going to hire employees, you will have to withhold taxes, and you will need an Employee Identification Number (EIN). An EIN is an Employer Identification Number that is the equivalent of your social security number, except for your business. The EIN serves the purpose of identifying a company, and is issued by the IRS.

After you have talked with your tax or legal professional you will have determined which form of business entity you will start with -- sole proprietorship, LLC (Limited Liability Company), or corporation. Based on that you will then know if need an EIN or not. You are required to obtain an EIN if you are:

  • Business entities that are separate from you as an individual, such as corporations and LLCs.
  • Any business that will have employees

You are not required, but may want an EIN if you are:

  • A sole proprietor who wants to separate the business from his or her individual social security number.
  • A proprietor who wants to establish business credit that is separate from personal. A good idea, especially if your personal credit score is less than great and would hold back the business’ opportunity to make purchases and borrow to expand.
This page will give you more information about the EIN and point you to the application:
IRS.gov Employer ID Numbers (EINs).

I won't write about this again for a while, I promise. Again, I'm trying to provide the info and guidance that I wish someone would have given me early on, rather than having to learn the hard way.

Nick Berry

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