Tax issues with hiring a US based contractor

[yngmind]

Let's imagine a guy who owns a disregarded entity, US LLC, is a tax resident of nowhere or a low-tax country (e.g., UAE), and wants to hire a new employee who resides in the US.

I know it can potentially create tax issues, which is why this smart guy (or not) established a work agreement with this person in the form of a ”˜self-employed contractor.'

Could there still be any issues?

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[aniglo22]

It doesn't really matter for the IRS if he calls himself a self-employed contractor . The Relationship matters , if the contractor is solely relying on you for income and also degree of control over the worker . The IRS will see through it and will classify him as an employee , therefore creating PE . And also if he makes significant business decisions it can also create PE see case InverWorld, Inc. v. Commissioner (1996)

 

[yngmind]

aniglo22 said:
It doesn't really matter for the IRS if he calls himself a self-employed contractor . The Relationship matters , if the contractor is solely relying on you for income and also degree of control over the worker . The IRS will see through it and will classify him as an employee , therefore creating PE . And also if he makes significant business decisions it can also create PE see case InverWorld, Inc. v. Commissioner (1996)
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So hiring him for the company in another country would be a smart move.

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[aniglo22]

yngmind said:
So hiring him for the company in another country would be a smart move.
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Some countries , often with comprehensive social security have laws for false self-employment . So watchout ! But I don't know to which extend they are enforced .

 

[daniels27]

aniglo22 said:
Some countries , often with comprehensive social security have laws for false self-employment . So watchout ! But I don't know to which extend they are enforced .
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Hiring him in France will give him all French labour rights. There have been cases with companies paying 24 months of salaries after laying them off. You definitely want to watch out and possibly stay out of EUSSR.

And as @aniglo22 pointed out, never contact people in the US for anything more than a simple job from fiverr.

 

[jafo]

yngmind said:
So hiring him for the company in another country would be a smart move.
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I only do business with other companies...NOT individuals! 😉
This way, it's NOT my problem!
I deal with several US LLCs. I suspect some are one-person entities, but I'll never ask, much less put something like this in writing to them.

I hope the people I do business with are sophisticated enough to know this.

PS. Also, I do NOT help people who need a job or something to do. I've witnessed way too many tragedies that started like this to ignore them and drive myself into this wall of eternal damnation. damn_(

 

[yngmind]

daniels27 said:
Hiring him in France will give him all French labour rights. There have been cases with companies paying 24 months of salaries after laying them off. You definitely want to watch out and possibly stay out of EUSSR.

And as @aniglo22 pointed out, never contact people in the US for anything more than a simple job from fiverr.
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I have an Estonian company and wanted to use it to hire him there. I'll explore the solutions with a lawyer and update you on that.

How is it going to work with those ”˜freelance payment services,' if you know what I mean. I don't want to advertise anyone here, but something like Remote.com.

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[yngmind]

What would be a reasonable jurisdiction to incorporate for staffing, with good EMIs available?

Last edited: Oct 11, 2024
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[aniglo22]

yngmind said:
What would be a reasonable jurisdiction to incorporate for stuffing, with good EMIs available?
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Toy stuffing ? You can just use services like plane, remote ,rippling ,playroll . You don't need a new legal entity

Last edited: Oct 11, 2024

 

[yngmind]

aniglo22 said:
Toy stuffing ? You can just use services like plane, remote ,rippling ,playroll . You don't need a new legal entity
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staffing* for sure, lol
Thanks

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[daniels27]

yngmind said:
How is it going to work with those ”˜freelance payment services,' if you know what I mean. I don't want to advertise anyone here, but something like Remote.com.
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They are no issue in terms of US taxes. Because they are small in terms of amount, there is no risk of them being considered "dependent" on you and also you won't hire director/managers there, normally.