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From sales director to outside sales consultant

My sales director is moving to another city and wants to continue selling as an outside contractor. Since he is going from employee to independent contractor, will I have a problem if he receives a W-2 and a 1099 from us for 2014?

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I don't see any problem. Just make sure that he signs ALL the exit documents (Quit claims, etc) you have and he signs a new contract that explicitly contains provisions that he is responsible for the taxes incurred from his new sales activity income and more importantly, that there is NO EMPLOYEE/EMPLOYER RELATIONSHIP.. As an additional layer of assurance, some have been advocating that the contractor establish a separate formal entity so that your company is dealing with that separate entity and not the actual person.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

This is actually an easier process:

a) in the reverse, i.e., from IC to employee
b) beginning of a new calendar year (no longer an employee).

Topic Expert
Karoline Mello
Title: Director, FP&A
Company: Apollo Group
(Director, FP&A, Apollo Group) |

Draft an independent contractor agreement outlining the pay/fee structure and the effective date the employment is terminated and the agreement goes into place. You shouldn’t have a red flag over issuing a W2 and a 1099, but the agreement would be enough “back up” for regulating bodies.
We had something similar happen, we just transitioned that person as a telecommuter and they did the same job remotely and kept the employee status.

Carolyn Newman
Title: President
Company: Audimation Services
(President, Audimation Services) |

Thank you, Emerson, Wayne and Karoline!

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