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What Are a Company's Obligations when Employing an S-Corp

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  • 06-02-2016, 09:29 AM
    question4ya
    What Are a Company's Obligations when Employing an S-Corp
    My question involves business law in the state of: California

    I would like to hire an S-corp to provide phone-based sales services to my company. What are my legal and tax obligations as a client of an S-corp? Specifically, could I be held liable if the S-corp improperly pays its employees/shareholders? (I have no indication that they will, but I have seen that S-corps can get themselves into tax trouble, and I don't want that coming back on me.) Can I be held liable if the S-corp doesn't have multiple clients? To my knowledge, the S-corp in question does have at least one other client, but I have no idea how long that relationship will last. Am I responsible at all for ensuring that the S-corp I employ continues to be legitimate?

    Also, are there any issues with me hiring an S-corp to provide the same services as regular employees on my payroll?

    Thank you SO much for your help!
  • 06-02-2016, 10:17 AM
    flyingron
    Re: What Are My Company's Obligations when Employing an S-Corp
    As far as you are concerned, there's no difference between an S-corp or any other corp. An S corporation is a form of tax treatment for a corporation; it's not a distinct type of corporation.

    And in fact, it's less than if you paid a non-corporation (i.e., a person). A person you'd have to file a 1099 for if you paid them more than the ($600) threshold. Whether the S corporation, C corporation or person you are contracting with has tax issues shouldn't be an issue with you (unless you are involved as an employee, shareholder, etc,....) of that entity.
    There should be no issues with contracting out to a corporation things you might have handled with your own employees (barring a few things that regulatorily are required to be performed by an employee under law elsewhere). Answering the phones isn't likely one of these.
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