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1099 vs W2

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 Employee1099 Independent Contractor
Continuing relationship with employerDoes same work for multiple people
Is furnished with tools or materials necessaryHas own tools and equipment. Can hire, supervise, and pay assistants
Can quit at any timeCan make a profit or suffer a loss
Must comply with instructions on when, where, and how to workSets own schedule and hours
Is trained by employerHas a business license
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