1099 or W‑2? The Truth About Worker Classification

In this episode of TFE Talks, Jordan Goewey and associate attorney Ben Ferris unpack the crucial difference between employees and independent contractors and why that distinction matters for business owners. They discuss how misclassification can create legal and tax risks or unnecessarily increase costs, and explain the key factors authorities like the IRS look at, especially who controls day-to-day work. Using examples like a gym and personal trainers, they highlight practical indicators such as control, payment structure, use of equipment and workspace, and whether the worker serves multiple businesses. They also emphasize that written agreements must accurately reflect the real relationship and be consistently followed in practice. The key takeaway: decide what you want the relationship to be, document it clearly, and then operate in line with that agreement to reduce risk now and protect the value of the business in a future sale. Topics in this conversation include: Welcome to Today’s Topic on Contractors vs Employees (0:33) Why Worker Classification Matters for Legal and Practical Risk (1:54) Tests Used by IRS, Department of Labor, and States for Classification (4:15) Gym and Personal Trainer Example Explaining Right to Control (4:15) How Equipment, Supplies, and Office Space Affect Classification (6:06) Whether Working for Multiple Businesses Points to Contractor Status (6:58) Role of Written Agreements vs Actual Facts of the Relationship (7:42) Key Provisions to Include in an Independent Contractor Agreement (10:10) Following the Agreement in Practice to Avoid Misclassification (12:07) Applying This “Decide, Document, Follow” Approach Across Legal Planning (13:34) Impact of Misclassification on Future Business Sale and Due Diligence (15:54) Closing Remarks and Resources for Listeners (16:13) TFE Talks: Navigating Wealth, Business, and Legacy is the official podcast from Thomas, Fisher & Edwards, a premier estate planning and business advising law firm in Greenville, South Carolina. Each episode, our attorneys break down complex legal topics—covering estate planning, business strategy, and legacy building—into clear, actionable insights. Whether you're refining a plan with our team or preparing for the future, this podcast serves as your go-to resource for thoughtful, strategic planning. Tune in for guidance that helps you protect what matters most. Learn more at www.tfelawfirm.com. The information provided in this podcast is for general informational purposes only and should not be considered legal advice. Listening to this podcast does not create an attorney-client relationship with Thomas, Fisher & Edwards or any of its attorneys. Laws and regulations vary, and legal matters are highly fact-specific. For personalized legal guidance, please consult with a qualified attorney.