Professional services

It can be a significant one in California. If contractors do work that is central to your business, under your direction, on your schedule, the classification is exposed. An EDD audit can reach back years and assess across everybody in the same category at once. If you have a long-standing contractor bench doing core work, that is worth reviewing before somebody files a claim and asks the question for you.

By tracking time against clients or projects and allocating direct labour cost, plus a fair share of overhead, against the revenue each one generates. Most firms have the time data already and simply never connect it to the financials. It is a set-up exercise rather than an ongoing burden, and the results are frequently uncomfortable in a useful way.

It depends on profit level, reasonable compensation, state tax treatment and what you plan to do with the business, and in California the analysis has to account for the $800 minimum franchise tax and the 1.5% S-corporation tax, which national guidance often omits. It is a real calculation, not a rule of thumb. We are happy to run it.

Almost certainly register for payroll tax in that state, and possibly create an income tax nexus for the firm. Tell us before the first payroll run if you can. Registering at the outset is straightforward; unwinding several quarters of unregistered payroll is not.

Book a scoping call using the form on this page, or call us. We will ask what you need, who is asking you for it, and what condition your records are in, then tell you what the engagement involves and what it will cost before anything begins.