Small Business Tip: Insurance and Taxes

Several small business owners have come to me recently with questions about whether they should pay their workers as employees or independent contractors.  This issue, employees versus independent contractors, is one I will address in a later letter.  To understand this issue, you have to first understand why a small business owner would not want to have employees: having employees means having to pay more taxes and for more insurance.

An employer with employees pays its share of employment taxes to the federal and state governments.  Additionally, all businesses need insurance, but businesses with employees need more insurance.  Some of the typical insurances that a small business should consider, some of which are mandatory, are:

• Worker’s Compensation Insurance
• Unemployment Insurance
• Business Liability Insurance
• Professional Liability /Errors and Omission Insurance
• Medical/Dental/Vision/Life/Disability Insurance

Failing to properly pay taxes or get insurance can lead to, among other things, the IRS coming after you for back taxes, interest and penalties or your business having to pay out of pocket for an employee’s work related injury.  You would not want to get in to a situation where you open a successful business and that business is brought to its knees due to unexpected liabilities or losses.  Protect your business investment and assets with the appropriate and necessary insurance and payments to Uncle Sam.

Written by Attorney Lori Brown, lbrown@hgplaw.com

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