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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

Reporting Independent Contractor Compensation
By Brett Melson Friday, November 19, 2010

With the calendar year quickly coming to a close, many business owners begin to review responsibilities for reporting taxes. One form small business owners frequently use is the 1099. There are twelve types of 1099 forms, but the one most commonly used is the 1099 MSC. Independent contractors, or freelancers, must use this to report income. With the changing economy, more employers have been turning to independent contractors rather than hiring full-time employees, and these businesses must report any services purchased in excess of $600. A business that employs an independent contractor must supply that contractor with a 1099 form at the end of the fiscal year, and the freelancer is required to use the 1099 form to report income and calculate any taxes due.

While regular employee wages are reported on W-2’s, only non-employee compensation is reported on the 1099-MSC. Misclassifying a worker as an independent contractor instead of a regular employee can cause costly problems with the IRS, so be careful to get the classification correct. The following are points to consider when determining whether a worker is an employee or independent contractor.

  • Freelancers should consider themselves as self-employed and they cannot get company benefits including health insurance, retirement, vacation time, or sick leave. The company doesn’t take federal, state, or local withholding tax from payment to the contractor.
  • The independent contractor normally has other clients and establishes his own work schedule and parameters, rather than being in the controlled setting of an employee.
  • The contractor uses his own materials, and his office is usually in another location.
  • The independent contractor has probably agreed to standards set out in a contract, and there is an understanding that the job may not be permanent.
  • The contractor pays his own expenses and is responsible for filing as self-employed, usually paying quarterly estimated tax returns.

The 1099 must be sent to the independent contractor no later than January 31 of the year after the service was rendered, and there are financial penalties for sending it late or failing to send. The IRS is able to track financial transactions and cross-reference the amount recorded. It is easy to blur the line between an employee and an independent contractor, and the IRS is cracking down, so it’s important to get it right!

View some of our other articles on 1099's: New Tax Law Affects Small Businesses and Update on 1099 Requirements.

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Video: How To Pay Your Franchise Tax: Corporations
By HBS Tuesday, November 16, 2010

Want to know the easiest and fastest way to pay your Delaware Corporation Franchise Tax? Harvard Business Services, Inc. offers a unique service to pay the Franchise Tax and file the annual report with the State of Delaware, and guarantees to pay it on time.

In this video, our Sales Executive Heather Garza walks you through the steps to pay your Corporation Franchise Tax via .

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Meet the HBS Team: Carleigh Lowe, Managing Editor
By HBS Monday, November 15, 2010

Carleigh LoweCarleigh Lowe is the Managing Editor of Harvard Business Services, Inc. She lends her project management skills and experience in publishing to manage The HBS Blog. Most recently, she worked at Dwell Magazine and Chronicle Books in San Francisco where she lives with her husband and daughter. Carleigh is a graduate of the University of Delaware.

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Video: 101 on Delaware Franchise Tax
By HBS Wednesday, November 10, 2010

Not quite sure why you pay a Franchise Tax here in Delaware or when the Franchise Tax is due for a Corporation or LLC? Harvard Business Services, Inc. is here to answer those and any other questions you may have. In this video, our Sales Executive Heather Garza explains what the term Franchise Tax means here in Delaware and when it is due for a Corporation or an LLC. Harvard Business Services, Inc. makes it easy to pay your Delaware Franchise Tax.

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HBS Team: Michael Bell, Director of Marketing
By Michael Bell Tuesday, November 9, 2010

Michael BellMike has been working in the company in a variety of aspects since a young child and is the son of Harvard's Chairman and CEO.
He was born and raised in Delaware yet traveled extensively while attending high school in Switzerland. He then went on to receive a Bachelor of Arts in Communications from Lynn University. He returned home and started working full-time at Harvard in the summer of 2009. Mike has worked in each department in order to learn all processes and details. In addition, Mike produced and directed marketing videos for Harvard.
He has the commitment and passion to continue running his family business well into the future.

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