We are in the very beginning stages of becoming a non profit homeschool band. We will charge a monthly tuition which will cover compensating the band director for directing/teaching the bands. The band director teaches at another business as well. He is planning on incorporating as an LLC. He gets a percentage of each students monthly tuition (he quoted us the percentage he wanted).
Would he be considered an employee or an independent contractor? Again, we are in the very beginning stages, and we want to make sure we do everything correct and legal.
Thank you for any information you can give us.
You told me 3 things that seem to imply that your band director looks like an independent contractor (IC):
1. He teaches at another business
2. He is setting himself up as a business owner (“planning on incorporating as an LLC”)
3. He is not paid by the hour (“He gets a percentage of each students monthly tuition”).
But there are many other factors to consider, mainly how much control your organization will have over him and his work. I discuss the other factors to consider in my book Paying Workers in a Homeschool Organization
If you determine he is an Independent Contractor, then I strongly advise you to have a written contract with him and clearly spell out that he is hired as an IC and responsible for his own taxes (i.e. your organization will not be withholding any tax). Have him fill out a W-9 to collect his legal name and Social Security Number (or EIN for his business), too. This is all covered in the Paying Workers book.
Good luck to you! I hope the band is a great success.
Paying Workers in a Homeschool Organization covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.
Carol Topp, CPA