If a Business Retains Someone to Provide Services, That Person

question 86

Essay

If a business retains someone to provide services, that person may either be an employee or be self-employed (i.e., independent contractor).
a. What are the tax advantages to the business of having the service provider classified as self-employed?
b. What are the advantages and disadvantages to the service provider of self-employed status?

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Definitions:

Inventory

The total value of a company's raw materials, work-in-progress, and finished goods that are considered assets on a balance sheet.

Account Receivable

Amounts owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of a business.

Supplies

Items used in the day-to-day operations of a business, often consumable in nature, such as office supplies, manufacturing materials, or maintenance necessities.