Archive for the ‘Corporation Formation’ Category

Is an S Corporation Shareholder an Employee or Independent Contractor?

Tuesday, April 9th, 2013

S corporation shareholders may be independent contractors, but not if they are also officers of the corporation

Let’s say the shareholder of an S corporation wants to do some work for the corporation and be paid as an independent contractor with a 1099-MISC. Is that possible? Is it even legal?

The short answer is yes. But there’s an important distinction that needs to be made here. A shareholder of an S corporation could be an independent contractor, but a corporate officer is considered an employee and must be paid with a W-2.

According to the IRS, “corporate officers are specifically included within the definition of an employee under FICA, FUTA, and federal income tax withholding purposes.”

The only way a corporate officer can be exempted from being an employee is if he (more…)