Question by Andrew: How does my LLC pay independent contractors?
I work a lot as a producer/director for companies, creating videos and commercials for web and broadcast, etc. I’m somewhat fresh out of college, so I’ve generally just worked 1099 on a per project basis, but I’m starting to take on bigger gigs that I’m fully producing myself. So basically I’m looking into starting a production company, and an LLC seems to be the best way to go. However, my main concern is this:
I’ve generally learned (at least with commercials I’ve done with decent sized corporations) that when a production budget is approved, the sum of the entire budget is paid out to the company (whether at once or spread out). The company then uses it to hire crew, purchase/rent equipment, etc. I’m assuming that all production costs are just deducted as expenses? And I pay tax on whatever profit is left over? What happens tax-wise to the money used to pay independent contractors though? Just about everything I’ll do will require some sort of film crew, so I’m just wondering if I pay any sort of tax on that money.
Answer by v b
You need to make sure you understand the difference between a contractor and an employee. The fact that need someone for one day does not make them a contractor.
If they are contractors, you make darn sure they fill out form W-9 BEFORE they work. You need to verify they give you a name, address and SSN. Then you issue a check. At the end of the year, you issue the 1099-Misc to pass the income through to them.
If they are employees, you have them fill out form W-4, I-9, withhold fica/mc, pay FUTA (and SUTA) and issue a W-2.
By the way, if you go the LLC route and do nothing else, you are still a schedule C filer to the IRS.
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