Episode 12 of the Circle Legal Business Fix-It Show teaches you why it's so important to correctly classify workers as employees or independent contractors. Hosts Kelley Keller and Susan Gunelius discuss the legal and tax implications of worker misclassification with Circle Legal Finance and Tax Advisor Joe Elwood.

So you’re ready to hire someone to help you in your business! Before you put the word out on Monster.com, you need to decide if you want to hire an independent contractor or an employee.

Confused by where the line is drawn? The IRS has clear rules that determine whether someone is an employee or independent contractor. In fact there are 20 different factors to take into account!

This decision is very important because there are legal and tax implications based on how you treat your workers. You may find yourself liable for their actions while conducting business or you may find yourself responsible for their payroll taxes if you don’t classify them properly.

So before you classify your new hire, make sure you decide the level of control you want to have over them. Making a mistake here could cost your business a huge amount of money, so listen and learn! You can also read the complete transcript with relevant links below.

Transcript and Audio of Episode #12
Announcer: It’s time to LIFT your business and your life on the Circle Legal Business Fix-It Show with your hosts, Kelley Keller and Susan Gunelius. Learn how to build a business you love on a solid foundation that delivers the future you want for you and your family. Here are your hosts, Kelley and Susan.

Kelley Keller: Innovative companies, business owners, and families, welcome to the Circle Legal Business Fix-It Show where you will learn to LIFT your business and your life with help from recognized legal and business experts you can trust. I’m your host, Kelley Keller, coming to you from the iHeartMedia Studios in Harrisburg, and with me is my co-host, Susan Gunelius, who is joining us remotely via video conference. Hi Susan.

Susan Gunelius: Hi Kelley. I am here and ready for an interesting show today.

Kelley: Yes, in fact we also have with us Circle Legal’s very own Joe Elwood, our tax and financial advisor who is going to help us help small businesses understand the difference between employees and independent contractors. So it may seem like a little of a dry topic but one that we will do our absolute best to make lively, interesting, and very educational.

Joe Elwood: Exactly.

Kelley: Exactly, exactly. Well, just by way of reminder, the Circle Legal Business Fix-It Show is about building and maintaining a solid LIFT Foundation for your business. LIFT being the essential Legal, Insurance, Finance, and Tax building blocks of your business. Without a strong LIFT Foundation even the most innovative companies will fail—simply non-negotiable.

Before we start talking about employees and independent contractors, we have a couple of announcements that we want to make sure that we get out to you right away.

Susan: Yes, we do. The first one I want to mention is our ebook is available on our website. It’s called “41 Steps to Start a Business and Build Wealth the Right Way.” It’s almost 60 pages of information that you don’t want to miss and it’s completely free. All you have to do is go to CircleLegal.com, and you’ll see how to download it there. I know it’ll be really helpful to you, so I hope that you don’t miss it.

Second, I want to remind our listeners—if you listen to us each week then you already know—that David Meerman Scott, the international bestselling author of “The New Rules of Marketing and PR” as well as a bunch of other marketing-related books,