[Oxforddan]

I have a small shop in Long Island and I need to make a decision for January. I pay all my reps a 50% split with no salary. I provide everything needed to operate successfully i.e. Desk,crm,leads, back office, etc.. Can I keep everyone working in my office as an independent contractor with no salary legally? Or do I need to switch to w2 and thus pay minimum wage on top?

[Karen37a]

You can pay 1099 if you meet the "independent contractor" tests or standards/guidelines. The most important thing being that you cant control their time/schedule and method of operation other than to keep them in line for Compliance reasons (and the safety of your brand or trademark.legal issues etc)

Most brokers cant/wont work 1099 and if they do they get bigger than their britches telling you whats what even though they blank , make 0 sales, maybe 1 on a month to month basis. ( its wonderful when they tell you what you are doing wrong in your business/sales pitch when you make 10 personal sales for the month and they made 1)

The only thing you can do is tell them to hit the bricks or Lead from the front be the # 1 sales person and expect them to do half if not 1/4 of what you do and have accountability or pipeline meetings.

Something to ponder ...If they had the ability to be self employed 1099 , why would they not have worked for themselves already . ( some have valid reasons, like I did and probably you and half the people on this site ) There are Huge pitfalls with 1099, it can be done because I have a 1099 business . I am just losing my sanity and patience,and I wonder if its all worth it at times...then I snap out of it .."of course it is .Huge $$ just keep swimming"

95% of the people who start working will never make it past the first 90 days, be prepared for them to blame you and everything around you including their wife and grandmother ( who you later find out really died 20 years ago) for their non success. I had a guy say "i quit" I said , you would have had to get started to quit. pick up the phone or something lol

If they are 1099 they cant take the chance on not making $$ ( fear of failure envelopes them) if the rent is due and when they do not dial for 30 days and blank they come looking for a handout or get desperate.If you pay w2, factor in the profit you need to make to survive paying non productive lunatics (aka the toothless crk head factory ) for 90 days until you find a few gems sifting thru the massive applications and bodies of people crossing your path talking big.

When I worked for someone w2 , instantly i knew they couldn't make it in spite of the fancy furniture. It was fun( sarcasm ) having a telemarketing manager who uses the ben franklin close over the phone trying to teach me to close by dropping and closing on rate .

( the patented Regulation drop close )

Do not buy fancy furniture, sit on a box Watch your closing ratios and margins of yourself personally and your team and grind it out

Let me know when you make it to the top of the mountain. Bring extra oxygen, I am the top and dying trying to get over the hill. And I will die up here if I have to ...no retreat.

w2 is easier to control. and saves your sanity, but then there are margins. Give them tiered bonus /commission on top based on production. Also check your state's workman comp laws, sign up for unemployment insurance etc etc. Don't forget the non compete/ tortious interference agreements because 1/8th of them no matter how good you treat them are going to try to break out and take your clients and half your staff with them, only to fall flat on their face 90 days later.

See you at the top ...Zig Ziglar

Gl

[Sean Cash]

I have a small shop in Long Island and I need to make a decision for January. I pay all my reps a 50% split with no salary. I provide everything needed to operate successfully i.e. Desk,crm,leads, back office, etc.. Can I keep everyone working in my office as an independent contractor with no salary legally? Or do I need to switch to w2 and thus pay minimum wage on top?

I hate to say this but what did your accountant recommend?

[Oxforddan]

He said w2. Even though I could make my "contractors" sign an independent contractors agreement I would then not be able to supervise them in any capacity . It makes more financial sense for me to pay everyone as a w2 to have an insurance policy incase of someone filing for unemployment or an audit. As with most things in life, it costs more to do things the right way, so I went with w2.


And Karen thank you very much for your response. I always appreciate your perspective.

[Sean Cash]

smart

[Karen37a]

Just out of curiosity .Why would an accountant be an expert in building a sales team?

Accountants usually have a "w2 mentality" as we call it.

Stick with the w2 like he said.Its easier and very few make it the other way.

And You can "supervise" 1099's for compliance reasons. If you have a broker on your team with your logos, applications, business cards etc ....guaranteeing rates, saying 10 year loans / not advances etc. The person in charge is the one who is going to get in trouble, not the rookie broker because he will claim ignorance of the law or guidelines. ( this is why that standardised mca compliance exam is a good idea, to protect the owners from this claim)

(in the last post I stated that you have voluntary "accountability meetings" or "pipeline meetings" to give updates and get updates on their files.If they do not show up they you see who is serious or not)

"failure to supervise" is the exact charge or violation. Or "selling away" for the bad recommendations they make sitting in your office chair, even thought you were unaware of it ( that's if we were regulated)I stick to the 110% guidelines because It was ingrained in me...and its also the right thing to do.Also Certain states you do not need the insurance unless you have over 5 employees including yourself......In the end it is easier to have a w2 base shop..

BUT Be Careful they don't take 90 days pay and no production, and then you are bankrupted, not to mention defaults etc ...Bad Salespeople move from office to office sucking up 90 days of w2 wages before they get "found out" and fired...

disclaimer ** I am not an atty / accountant nor regulatory agent...check to make sure its accurate

[Oxforddan]

My accountant is definitely not an expert in building a sales team. I would say he is an expert in the best way to move money through the business though. W2 mentality I like that it feels like the nys dept. of labor has the same mentality. Smh

[RichardGerard]

Oxforddan,

While I don't know your Accountant, I can say unequivocally that Accountants are experts at mitigating tax risk. In telling you to make your reps W-2's he/she is telling you that it isn't worth the potential challenge of an Unemployment Insurance audit associated with your 1099 'reps' through NYS.

You are not being told about passing through capital. If that was the case, the Accountant would tell you to have your reps become incorporated, write checks to their companies and charge them rent for use of your space. That is the most effective way to circumvent matching 7.65% FICA, and avoid the potential need to include reps on a group insurance plan.

[HDF]

Great advice Richard! And also a great recruiting tool to help to get only the best-in-class available advisors.

Very wise indeed with the predicted meltdown we are seeing out there.

[Karen37a]

Great Ideas Richard and in theory it works.

30 years I have been in the sales industry watching all types of organizations succeed and fail, being on the inside of some and in charge of others or owner of a few.

In the end the Leader of the organization is the one who is going to drive the traffic thru with recruiting brokers and sales. The ability of the Leader trickles down.The Better the Leader the higher caliber of people that are attracted to them. When you get top sales people to join you, they have a "prima donna" attitude, myself included ...and I can tell you one thing....

Top sales people do not appreciate advise from the people on the bottom, so in order for you to lead effectively do it yourself first

( not you Richard because I know you do it, or anyone posting..general comment).

Its like undercover boss, unless you cleaned the toilets you do not know the most efficient way to clean toilets no matter what degree or certificate you have or wave around.

The more ability you have ( to do it yourself) the better caliber of person that will follow you.

If there is a war and the bombs are coming in; and someone is in charge of the troops with no fighting ability ( someone gave him the leadership position because he went to Harvard or his family ties). When that person tells the soldiers they are going to go right ( when their life is on the line ) and another person in the troops, the one with the best proven fighting ability says ....no I am going left, its the best strategy ...go left. Guess which way the troops go? No matter what rank is giving the orders?

Left, because their life is on the line and they want to stay alive, they do not care what college you went to, or if you offer a 401k plan.

When you pay someone w2 they will do whatever you say because you are paying them, even if its the wrong strategy. They will pretend to respect you, smile in the hallways. Take their paycheck away and see who stays. Watch the attitude shift.

Real Leaders lead from the front and have the respect of the "troops" based on proven results not ideas or theories that have not be battle tested.

This is why some C/D Paper organizations have more sales people than some A paper ...The owner or leader is better at sales and motivation.

Take the owner /leader away from the organization and it fails, even if you buy it turn key ( unless they truly converted from a business model run by its leaders to running on its own)

And HDF the prices are moving because of the bonds/stockmarket/ fed funds rates etc ...which I told you would happen months ago.

Once the price moves higher ...self regulation. Most can't sell up or profit because their whole business model is based on low rates, that are not sustainable, nor leave room for margins

Tell me about algorithms

w2 is great. Make sure you close enough sales in 90 days to cover costs and then profit. I know this lunatic ISO in NJ spent 100k a month on salaries/rent etc. recently...didn't listen to me. Knew more than me because they were worth 100 million on paper.

10 deals funded in 10 months... I am still cracking up over it.

[Karen37a]

Now I have to go become a better leader and not tell people off when they think of hairbrained marketing/ team building ideas.( Emails ! You think you are the first person to invent the email, oh its postcards now.., now flyers, oh business cards, what are you going to do stand on a street corner, oh you have special leads..for Gods sake just pick up the phone it doesn't bite, what are you going to use smoke signals next lol )

I shouldn't even stop them, they are using their personal advertising dollars and if they only make one sale..they still split it with me and I get $$ no cost out of my pocket , just my sanity.

What I have learned thru all my travels and the most important thing is ...W2 mentality attracts W2 mentality ( and not the best salespeople) and there is nothing that I can do to change it except to "do it myself", keep on dialing and closing as the bombs are coming in , don't look back at the carnage you will turn into a pillar of stone, some will make it out with you if you lead from the front not an Ivory tower .The rest are going to hate you. Criticism is the price you pay for Leaping past mediocrity. Keep on plugging you will make it out on the other sidee

New years resolutions 10 personal sales in one month..everyone

[Happy Horse Shit]

He said w2. Even though I could make my "contractors" sign an independent contractors agreement I would then not be able to supervise them in any capacity . It makes more financial sense for me to pay everyone as a w2 to have an insurance policy incase of someone filing for unemployment or an audit. As with most things in life, it costs more to do things the right way, so I went with w2.


And Karen thank you very much for your response. I always appreciate your perspective.

If you didn't withold any taxes on your employees and they made 40k or more then I think they will be getting pinged for not doing quarterly deposits to the IRS. I don't know your liabilty as the employeer but I suspect you too will pay peanlties on not withold medicare and other incidential taxes. But that is what they make accountants for check with them before you paint yourself in a corner with fines.

[staten]

If you didn't withold any taxes on your employees and they made 40k or more then I think they will be getting pinged for not doing quarterly deposits to the IRS. I don't know your liabilty as the employeer but I suspect you too will pay peanlties on not withold medicare and other incidential taxes. But that is what they make accountants for check with them before you paint yourself in a corner with fines.

Alas, one would think so, but its my recent experience that accountants and auditors will do or say or opine on anything, including blatant fraud, if the price is right. I've dealt with 2 this year. Both were fraudulent with PWC and Withum phoning it in and signing off on anything for or fees. Insane.

[Karen37a]

Staten...happy is my very ultra ultra conservative friend from real life who nags me to death on my taxes/compliance and pays bills 2 weeks ahead of time or they are considered late to him.I use his accountants and they are not H and R block

Happy do not mention my last minute filing habits because I have confessed already..I hate paperwork

And Happy, he is shifting his new office on Jan 1st...he is covered this year ( i think )

I am not an accountant but I do believe you might need to pay quaterly taxes on 1k in income or more, but this is off of your net quarterly income...

so net qtrly income divided by 4...and you get zonked on the amount due qtrly if you estimate wrong
( I was zonked before) but it was waived because i used the annualized method.

Lots of deductions when you are self employed in a new business..leads etc..so its net qtrly.( and what Richard said pass thru )

** **and I am not close to being an accountant..tax issues go to an accountant, not team building strategies w2 vs 1099 or business set up ***