Growing a Business

Attorney Gene’s Top Tips for Hiring Independent Contractors

The ability to avoid payroll taxes and other regulatory aspects of hiring employees causes many small businesses to turn instead to hiring independent contractors. However, do not make the mistake of thinking that independent contractors and employees are interchangeable based merely upon what you choose to call them.

Don’t misclassify workers as “independent contractors” when, legally, they’re “employees.”

Laws exist to protect workers from being taken advantage of by people who hire workers as “contractors” or “1099 employees” as a way of getting around payment of minimum wage/overtime compensation and statutory benefits that are legally mandated.

Different laws have different tests for the purpose of determining whether a particular worker is an “independent contractor” or an “employee.” “Employee” is defined differently for purposes of tax withholding (federal and state) wage/hour (federal and state), unemployment, and workers compensation insurance. For wage/hour purposes under Colorado law, “employee” “means any person, including a migratory laborer, performing labor or services for the benefit of an employer.” Colo.Rev.Stat. § 8-4-101(5).

“Relevant factors in determining whether a person is an employee include the degree of control the employer may or does exercise over the person and the degree to which the person performs work that is the primary work of the employer; except that an individual primarily free from control and direction in the performance of the service, both under his or her contract for the performance of service and in fact, and who is customarily engaged in an independent trade, occupation, profession, or business related to the service performed is not an “‘employee.’” Colo.Rev.Stat. § 8-4-101(5).

Notice those words, “degree of control.” Do you see how the definition of “employee” for wage/hour purposes is dependent upon the facts of each situation? If you hire the neighbor’s kid to mow your lawn and you tell him or her to show up exactly at 10:00 a.m. on Tuesdays, to use your own mower, then use your own edger, then use your own leaf blower, you have probably just hired yourself an “employee.” And that would probably still be true if the kid mowed lawns for money for a few other neighbors as well. Contrast that with a true “independent contractor” relationship where you hire a company you found on the internet with four crews of two people each, that come on their own schedule, use their own machines, and have hundreds of customers. If you’re the one with the lawnmowing business and you intend to staff it with a bunch of teenagers who have their own lawn mowing businesses, but you’re providing machines and dictating work schedules, your probably going to be deemed to have “employees,” not true “independent contractors.”

Don’t assume that just because a worker is an “independent contractor” for one purpose, he or she is an “independent contractor” for all purposes.

The definition of “employee” is different under other statutes (taxation, unemployment, and workers compensation), so don’t believe it if anyone ever tells you there is a simple answer to the question, “is he/she an employee or independent contractor?” It is a complicated, fuzzy, fact-intensive inquiry—under each statute.

The back liabilities, penalties, legal expenses, accounting expenses, and lost sleep you WILL experience WHEN (not “if”) you are audited for misclassification of workers will make you wish you hadn’t done that. The SBDC offers materials, consulting, and webinars on proper classification of workers. Take advantage of them. Consult the IRS, U.S. Department of Labor, Colorado Department of Labor Wage/Hour Division, Unemployment Division and Workers Compensation Division for the rules for distinguishing “employees” from true “independent contractors” under the various statutes. When in doubt . . . the worker is almost certainly an employee.

Have a written Independent Contractor Agreement.

It is very important when hiring a worker that in any way could be construed to be an “employee,” you have a written independent contractor agreement. In particular, for Colorado unemployment insurance purposes, independent contractor relationships should be documented by a written agreement containing specific provisions. Some of the provisions must be written in ALL CAPS or Boldface. I suggest you hire an experienced employment law attorney to review any independent contractor agreement you come up with. Your average business attorney isn’t going to know about the Colorado unemployment guidelines for what independent contractor agreements should contain. Using qualified and experienced legal counsel can help you include in your form agreement all sorts of things you may not have thought of such as provisions for protection of trade secrets, non-competition provisions, an indemnification clause, alternate dispute resolution mechanisms, and a clause for recovery of attorney fees in the event of breach of the contract.

Check out your contractor’s licensing, insurance, and bonding situation.

Many lines of work are regulated by the Colorado Department of Regulatory Agencies also known as DORA, and people performing such work are required to be licensed. Even if you don’t need a licensed service, you may still want a service that has in place suitable liability insurance or bonding. Don’t be satisfied with just seeing a photocopy; call the supposed insurance company to make sure the policy is currently in effect.

© Copyright 2019, Gene R. Thornton, Attorney-At-Law, all rights reserved.

Attorney Gene’s Top Tips for Staffing Up

There comes a time when a small business owner may declare: “I need to hire someone to help me. I can’t do everything by myself.” Here are my top tips for businesses in need of staffing help.

Farm it out.

Many small business owners do their own payroll, accounts payable, accounts receivable, and tax returns. Bite the bullet and hire a professional so that you can spend your time making money and doing what you’re good at. Why did you want to start your own business in the first place? I bet it wasn’t the prospect of doing payroll every two weeks.

Consider alternatives to hiring traditional employees.

Hiring traditional employees involves a lot of paperwork, posting statutory notices of legal rights, paying minimum wage and overtime, tax withholding, unemployment insurance, workers compensation insurance, and exposure to anti-discrimination laws. You may be able to get by with hiring independent contractors. But BEWARE! See my blog on Hiring Independent Contractors. Hiring an independent contractor isn’t as simple as you and the worker agreeing not to withhold taxes and calling him or her a “1099 employee.”

Consider using a temporary agency or professional employer organization (PEO) to test the waters and have the paperwork done for you.

Or, if done properly, you may be able to set up a low-cost internship. See U.S. Department of Labor Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act for guidance.

For the right kind or organization, you may be able to recruit volunteers. Consult U.S. Department of Labor Fact Sheet #14A: Non-Profit Organizations and the Fair Labor Standards Act (FLSA).

Put your kids to work. The experience of earning a dollar rather than having one given to them could be hugely beneficial to your youngins. Plus, it starts building their résumés. Also, there are some nifty tax benefits for hiring your own children. But don’t violate the child labor laws. The child labor laws tell you what kind of work kids of various ages can do, when they can do it, and for how long. We don’t want eight-year-olds disposing of hazardous waste for 12 hours a day when they should be in school, for example. If you’re being paid by the business, you probably have to pay your children to work in the business as well. But that doesn’t mean you have to pay your own kiddos the same rate you would have to pay to get a willing worker on the open market, so long as you pay minimum wage and overtime.

Count the costs.

Don’t staff up without knowing what it’s going to cost you. Once you realize the full costs, you may decide it isn’t worth growing your business after all. You will have to pay: minimum wage, and time-and-one-half overtime when applicable, the employer’s side of FICA, FUTA, Colorado unemployment insurance premiums, and workers compensation premiums. Depending upon the size of your company, you may be required to provide health insurance under the Affordable Care Act. In the near future, and again depending on the size of your company, you may be required to provide paid family and medical leave. You’ll have to pay a little for employees on jury duty too.

Don’t grow too fast.

Although growing your company may be have been an initial goal and make you feel like you’re a success, reconsider whether that is something you really want—at least right now. Growing too fast has been the downfall of many small businesses. The businesses end up running the owners rather than the other way around.

© Copyright 2019, Gene R. Thornton, Attorney-At-Law, all rights reserved.

How to See Immediate Results From Your Website

By Tim Fitzpatrick |  SBDC Consultant + President of Rialto Marketing

"Your website is the workhorse of your marketing plan. Virtually everything you do from a marketing standpoint will drive people back to your website."

Tim Fitzpatrick |  SBDC Consultant + President of Rialto Marketing Tweet

Your website is the workhorse of your marketing plan. Virtually everything you do from a marketing standpoint will drive people back to your website.

Yet, most businesses make many common mistakes with their websites. Be honest, are you committing any of the following mistakes?

     You don’t clearly communicate what you do?

     You are using images that don’t reflect your business and what you offer.

     You use insider language or technobabble.

     You have way too much text.

     It’s not clear what action you want a visitor to take once they land on your site.

Don’t worry, I’ve got you covered. You can quickly address any of the issues above by implementing the tips below.

If you choose to implement these tips, your website will become a critical element of your marketing strategy.

Here are the essential elements you should have on the home page of your website.


1. The Above The Fold Trilogy

The above the fold portion of your website (the header) is the part visitors see on their desktop before having to scroll down the page. It is the most valuable real estate on your website, and you must take advantage of it!

The job of your website header is to get visitors to read the rest of your website. To accomplish this, you should answer three questions above the fold:

     What do you offer, or what do you do?

     How will it make my life better?

     What do I need to do to buy it?

Peoples attention spans are super short. Your goal is to have any visitor be able to read and understand this information within five seconds.

2. What Are The Stakes?

What does your customer have to lose if they don’t buy from you? That’s what the stakes section needs to answer. You can easily create this content by answering the following three questions.

     What problem is your customer having that you can solve?

     How is that problem making them feel?

     Why is it wrong for them to be burdened with this problem?

Here’s an example of the stakes content for our business (marketing consulting & digital marketing services).

“Are you tired of spending money on marketing and seeing no results? We understand how frustrating this can be, but marketing your business shouldn’t be a constant challenge.”

3. Trust Building Elements

Your customers aren’t looking for a hero, they are looking for a guide to help them solve their problems. One of the characteristics of a guide is credibility.

You can easily establish credibility with customers on your website by adding a few of the following elements.

     Customer testimonials.

     Certifications/Affiliations/Accreditations

     Logos of current/past clients.

     Results you’ve achieved for clients.

     Awards you’ve won.

4. The Plan

It’s vital to demonstrate your company is easy to work with visually. The plan section of your website will accomplish this.

The goal of the plan section is to provide your customers with a path they can take to work with you. Ideally, this should be 3 steps, but no more than 4.

For example, a plan for a financial advisor might be:

     1. Schedule a Consultation

     2. Get a Financial Plan

     3. Enjoy Your Retirement

5. Value Proposition

Customers don’t buy your product or service, they buy the results they can achieve from them.

What benefits will your customer experience when buying from you? This is your value proposition. Your website should list 3 to 4 results or benefits a customer will experience when they do business with you.

6. A Clear Call to Action

People don’t typically take action unless they are told to do so. This is why it’s incredibly important for you to clearly spell out what action you want a potential customer to take.

Your call to action should be all over your website. Don’t be afraid of having it in too many places. “Learn more” and “Get started” are not clear calls to action. Here are examples of great calls to action.

     Buy Now

     Schedule An Appointment

     Get a Consultation

You should also offer something of value on your website for visitors that aren’t quite ready to buy. Things like ebooks, cheat sheets, or checklists can be offered in exchange for a name and email address. Now you’ve collected a lead you can nurture via email until they are ready to buy.

7.  Additional Elements

In addition to the six elements above, you may want to consider incorporating some of the following “bonus” elements as well.

     Video

     Core Products/Services

     Target Markets You Serve

It’s amazing how many businesses don’t have these elements on their websites. By incorporating them on your website, it will make all the difference in the world.

That wasn’t so bad, was it? Make these changes to your website, and I’m sure you will generate more leads and get more customers in short order.

The Value of Acquiring and Retaining a Business Consultant

"The reality and value of a GOOD business consultant is that they don’t get caught up in the “Forest for the Trees” mindset."

Ron O'Herron - Pikes Peak SBDC Consultant Tweet

A business professor once stated to his class that the definition of a consultant was “a person who rides down from the top of the hill after the battle is over and shoots all the wounded.”

Another definition that has circulated in the business community is, “A person who borrows your watch to tell you what time it is and then charges you for it.”

Although opinions and mindsets will vary, the truth and fact of the matter is that a good business consultant can and will add significant value to the overall operation and growth of a business!

A strange but true story and example of a value-added Business Consultant relates to a serious problem that existed at a nuclear power plant. Their trouble was detected in one of the reactor transmission lines, which was becoming very costly and creating a possible safety issue.  A consultant was called in and after studying the problem for several days and meeting with numerous operations engineers, he provided a solution. On a diagram of the reactor and transmission lines in question, he drew a symbol for a strategically located special type of monitoring/relief valve.  The device was obtained and installed as suggested by the consultant. Immediately the problem went away, cost savings were realized, and the safety threat was eliminated. Upon receiving the consultant’s $75,000 invoice for work performed, the Chief Engineer was shocked and questioned the consultant. The explanation was quick, factual and simple…$25,000 was for the specialty valve and the balance was for knowing where to locate it!

The reality and value of a GOOD Business Consultant is that they don’t get caught up in the “Forest for the Trees” mindset…they don’t bring any industry specific “paradigms” to the table.  What they do bring, however, is an ability to listen, ask questions, think outside the box, analyze and provide value-added solutions to the desired growth direction of a business, its owners, and its employees.

The Business Consulting World has an array of consultants and consulting firms.  Some are generalists, while others specialize in a given field.  The vast majority of these consultants aspire to a “one-stop shopping” process, in that the process and methodology that they use, will work for any business. However, once again, the reality is that every business has its own personality…the personality of its owners, managers, employees, products and services offered, market or industry and equally important, their customers and clients.  Without a good understanding of all these operational areas and how they affect the business, a consultant’s suggestions and advice is “wishful thinking” at best!

So with all that said, making the decision “to use or not to use” a business consultant rests on the shoulders of the owner of the business.  A GOOD Business Consultant has “been there and done that” and their methodology and number one objective is helping you and your employees grow the business and be successful, by analyzing the past, dealing with the present and planning for the future!

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