Employment Contract

By: Martin M. Shenkman, CPA, MBA, JD

To hire someone to provide you services for a fee. From a tax perspective the person hired can be a consultant (more independent, responsible for their own payroll taxes and perhaps insurance, etc.) or an employee (with you as the employer being responsible for payroll taxes, insurance, etc.). Consider having a written employment or consulting agreement to document the agreed relationship, tax status, etc. This can be vital to avoid any misunderstandings between the employer and the employee/consultant, protect the intended tax status (although an agreement alone won't be binding on the IRS), and more. For example, how long is the term (time period) for which the person is hired? Can they legally contract for and bind your company or business? How will they be paid and when? Under what conditions can you fire them? An AT WILL employee can be fired at anytime, but this should be clearly documented in writing. What must you pay by way of severance if you fire the employee or consultant? What job functions must they perform.

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