I thought I had it all figured out, but now I'm not sure. My 20 yo daughter is currently unemployed. I bought this e-commerce site and am excited about beginning. My plan was to be a sole proprietor and have my daughter do most of the web management and order fulfillment. Now I am clueless about how to pay her/taxes/etc. She will basically be paid commissions on store sales. I'm totally clueless of what to do next...

Theresa Merkling
http://www.2scrappychixdesigns.com

The easiest thing to do, especially if her only compensation is sales commissions, is to have her as a contractor. This means that she is not an actual employee, so you don't have to do taxes, reporting, etc. At the end of the year, you will give her a form called a 1099. This is very common with independent sales reps.

Hope this helps.

Serve, and Thrive,
JohnOnSales
Real world selling: http://www.johnonsales.com
Free internet newbie info: http://tinyurl.com/63kxjw

That was my initial thought too, but yesterday I called this local business that's supposed to help small businesses with their plan etc and the gal there told me we really didn't meet the contractor qualifications - that it was more for corporations. Now I'm really disturbed. I'll be trying to find a second opinion with CPAs today locally, but thought maybe someone here has dealt with this situation and could add their two cents.

Thanks for replying!

You are correct. There are 21 rules that the IRS uses to decide whether or not you can be classified as a contractor. However.

Have your daughter file her name as a business name with the state or whatever is required locally - this usually costs less than $50. If she has her own company, then she should just invoice you for her share of the commissions. It sounds like a lot of trouble, but its not - her company is contracting with your company in order to do some work for you, which you will pay for through commissions. At the end of the year, she would file taxes as a self-employed person.

Serve, and Thrive,
JohnOnSales
Real world selling: http://www.johnonsales.com
Free internet newbie info: http://tinyurl.com/63kxjw