New job - employee vs. contractor

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209south
Posts: 452
Joined: Mon Jan 28, 2013 10:58 pm

New job - employee vs. contractor

Postby 209south » Fri May 19, 2017 8:52 pm

I am starting a new job as CEO of a micro-cap mining company...early stage and the few current dedicated personnel are working on a contract basis. I have been offered the opportunity to work either as an 'employee' or on a contract basis...salary $250k bonus expectation $100k and a whole whack of stock options, where the value will hopefully lie...what are the key issues I should be thinking of? The company is currently tiny so there is no health care or pension plan...but they will reimburse my health insurance premiums in either scenario, and I have asked that they cover the employer's portion of FICA if I'm on contract...the big issue is the stock options...if the company/project 'works' there will be $millions of value created in the stock...does the tax treatment for that vary whether I'm an employee or receiving the options via my LLC???

123
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Joined: Fri Oct 12, 2012 3:55 pm

Re: New job - employee vs. contractor

Postby 123 » Fri May 19, 2017 9:27 pm

Depending on the state you likely would have more rights as an employee then as a contractor. Employees usually have to be paid on a set schedule, contractors can be a different ball game. I'm not saying the business may fail but...
The closest helping hand is at the end of your own arm.

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Shackleton
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Re: New job - employee vs. contractor

Postby Shackleton » Fri May 19, 2017 9:32 pm

No idea but I suggest you watch "Gold" with Matthew McConaughey.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton

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Watty
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Re: New job - employee vs. contractor

Postby Watty » Fri May 19, 2017 10:14 pm

Another consideration is that as a contractor I would think you could likely put around $50K into a solo 401k.

The situation sounds way beyond something you could good answers for on a message board and it would be well worth the cost of getting professional tax advice.

209south
Posts: 452
Joined: Mon Jan 28, 2013 10:58 pm

Re: New job - employee vs. contractor

Postby 209south » Sat May 20, 2017 9:06 am

Thanks - I am seeking professional tax counsel but often find more creative ideas on here than I do via lawyers. With respect to the movie Gold, not only have I seen the movie but I somewhat lived the movie as I was part of the team advising the chosen buyer for Bre-X...the fraud was discovered through our client's due diligence. Like many exploration-stage mining companies, the one I'm joining will either be a 10-bagger or go to zero (odds always favor the latter!)...so for me the key issues are (a) maximizing 401k contributions while I'm CEO, and (b) minimizing the tax drag of the options if this is a 10-bagger. I gather there is no way to declare the value of a stock option as income upon grant, but the taxation only occurs upon exercise, so the question is 'where is the ideal place to hold the stock options if they one day have tremendous value?'...any way to put the options into a trust, or even better a self-directed 401k?????

avalpert
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Joined: Sat Mar 22, 2008 4:58 pm

Re: New job - employee vs. contractor

Postby avalpert » Sat May 20, 2017 11:34 am

How would the working relationship differ between the two compensation relationships? If it won't, what makes you sure the company can legally treat you as a contractor and not an employee?

209south
Posts: 452
Joined: Mon Jan 28, 2013 10:58 pm

Re: New job - employee vs. contractor

Postby 209south » Sat May 20, 2017 2:53 pm

Good question, and I don't know the answer for sure...but it is not uncommon in the junior mining space, where many people wear multiple hats with multiple companies. This is a relatively new company, and the only three people working full-time are contract geologists receiving pay on a per diem basis...actually as I think about it all the accounting/legal services are also provided by another group on a contract basis...I think unless/until the business evolves to a development stage we may need many traditional 'employees'.


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