As an associate, you will either be an employee or an independent contractor. Some owners try to hire an associate as an independent contractor because they can potentially save money. However, the IRS has strict guidelines on this issue and running afoul of the IRS can lead to back taxes, penalties and interest. As the one being hired, this is not so much an issue for you, and I won’t go into the IRS guidelines in this post, but there are other issues of which you must be aware.
Your main issue will be compensation. An independent contractor must earn more than employee to net a similar amount. There are two reasons for this; expenses and taxes.
Typically, an employer will pay for your; license, malpractice insurance and continuing education costs. You may also receive paid time off and health insurance. And, you also may be able to participate in a pension or profit sharing plan.
As an independent contractor, you will be responsible for all your expenses. In addition to paying these expenses, nothing for taxes will be withheld by the employer and you will be responsible for paying your own taxes. You will be required to pay quarterly income taxes and you will be required to pay self-employment taxes on top of your income tax.
It will be important for you to have a good idea of these additional costs so you can make an informed decision when evaluating different associate opportunities.