1099 vs W2
1099 employees are considered independent contractors who are self-employed. A W2 employee is an employee who receives a regular wage along with benefits. A W2 employee has taxes already taken from their paychecks whereas a 1099 employee gets paid without taxes being taken out.
Advantages of 1099 Independent Contractors:
– Most independent contractors focus on one thing and bring specialized expertise.
– They have better flexibility because they can be used for short term projects or long term, where a regular employee would be with the business for a longer time.
– Since Independent contractors are not eligible for benefits, it lowers your company’s legal exposure.
– Lowers business costs because you aren’t providing things like overtime or benefits.
Advantages of W2 Employees:
– If you treat your employees right, they will feel more loyal to the company and do things to help and stay committed to the company.
– Having employees can help a business owner manage their time better by not having to worry about doing everything themselves.
– Employees only need to be trained once when they are hired about the company’s expectations whereas independent contractors aren’t a part of your in-office team, so they won’t be aware of company policies.
| W2 Employee | 1099 Independent Contractor |
| Continuing relationship with employer | Does same work for multiple people |
| Is furnished with tools or materials necessary | Has own tools and equipment. Can hire, supervise, and pay assistants |
| Can quit at any time | Can make a profit or suffer a loss |
| Must comply with instructions on when, where, and how to work | Sets own schedule and hours |
| Is trained by employer | Has a business license |
