In our last blog post we discussed the general test used for determining if one is an employee or an independent contractor. Why does it matter?
An employee is entitled to worker’s compensation if he is injured while performing services within the scope of his employment. An employee is also entitled to unemployment benefits if he is laid off from work. An employee’s FICA taxes are paid by the employer.
An independent contractor on the other hand must purchase disability insurance in order to be protected in case of injury on the job and will not qualify for unemployment benefits if he loses a client. An independent contractor is liable for his own debts, or the debts of his own business. Incorporating a business is an important step in protecting personal assets for an independent contractor.
Independent Contractors can Protect Themselves through an LLC
A Limited Liability Corporation (LLC) offers protection of personal assets because a creditor or judgment-holder can only reach the assets of the corporation to satisfy debts of the corporation and cannot take personal assets if an independent contractor is properly established as an LLC.
Understanding whether you are an independent contractor or an employee has significant impact on your need for insurance, protection of personal assets, and your estate plan. Experienced Estate Planning Attorney Elga Goodman also has experience in business law and she can help you create a plan to protect your business, your assets, and your loved ones. Contact us today at 973-841-5111.
Posted in: Estate Planning