EMPLOY ME. OR NOT.
As startups, Mynstein Inc. and Leanliness LLC are sifting through the same issues that all new businesses face. Like it or *not*, there are human resource considerations that must be addressed from the outset, and the government sets specific guidelines for completion timelines. Just being a startup doesn’t mean you don’t have to comply; if it did, I’m sure there are about 2,000 other things I would be doing instead.
DO I HAVE TO BE AN EMPLOYEE?
One of the first issues your startup will have to face is whether or not to employ the founders. At Mynstein Inc., we have done legal paperwork like RSPAs to compensate everyone for their efforts, but we are not employees of the startup company. From the startup perspective, this is great! Mynstein Inc. doesn’t need to worry about withholding tax or paying unemployment insurance. We can delay i-9 forms, W-4’s and registration with the Attorney General’s office.
SO WHAT’S THE PROBLEM?
Before you run out and fire everyone at your startup, or not hire yourself at all, you should investigate the way the IRS looks at things. You should also consider other implications, like funding. At Mynstein, we are using a company 401k as one method of injecting capital into the company. To be eligible for the 401k plan you must be an employee of the startup. So although it may not be legally required for taxation purposes, we will have to become company employees regardless. We are still a new startup and could delay employing some of the members for a while, or even indefinitely, but at Mynstein we are electing to just knock it out all at once.
What about your startup? Leave us a comment and tell us about the employee/employer arrangement you have come up with.