Friday, October 14, 2011

Independent Contractors Legislative Ideas/AB361

What is an Independent Contractor?

This has been a big issue for small businesses, not only in California, but around the United States.During a White House Conference in 1995, this issue rose to the top and put forth to the President by small businesses around the country. Misclassification can mean thousands of dollars in fines and penalties by the IRS and EDD. IRS and EDD are stepping up their audits of small businesses looking for these misclassifications. The problem is IRS and EDD have somewhat different definitions. The IRS has a 20 point test, but does not tell businesses how many of the points in the test you must comply with.

Have you been audited by IRS or EDD? Do you know what some of the rules are to establish Independent Contractor status? Small Business California is considering introducing legislation next session to clarify what the Independent Contractor rules are in California. What are your thoughts on this? If you would like to see the IRS 20 point test, please see the link below:

Speaking of legislation Small Business California is looking at putting together its package of bills for next year. We have legislators that have come to us asking for ideas on small business legislation they can carry. Do you have any ideas?

On Sunday the Governor signed Assembly Bill 361 [Huffman]. Small Business California was a strong supporter of this bill and worked closely with Assemblyman Huffman’s office in getting this passed and signed by the Governor. The bill creates a new, fully voluntary class of corporation called a benefit corporation. This allows businesses to pursue a material positive impact on the environment and community in addition to maximizing profits. Assemblyman Huffman says “we have a law that send a strong message to entrepreneurs that California is open for this emerging form of business.

Under AB361 businesses can choose to incorporate as benefit corporations and enjoy the following:
1. Greater access to social impact and venture capital investments
2. Legal protection for directors and officers in the more broadly defined fiduciary roles of maximizing profits as well as ensuring social and environmental considerations
3. Marketing opportunities because of their social responsibility.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116
License #0A32315

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