What is the name of your state (only U.S. law)? GA
Good afternoon. Please bear with me and let me lay out situation that advice is needed for.
I own a consulting company, formed as an S-Corporation ('company') in the State of GA. We obtained a client from out of the country who was establishing a US-based office selling IT services. To assist this client, the Company was to provide certain services including taking some steps to assist them in their immigration process.
There are 2 agreements that are relevant.
1) Employment Agreement/Confidentiality Agreement - There is an agreement with the employee which outlines the hiring of employee as an employee of the Company. Within this agreement, the following statement appears:
"Occasionally, the employee may receive compensation according to this agreement directly from a client or customer. It is understood that any compensation from any source as it relates to employees position will be considered fulfillment of this agreement. Employer will have sole and final determination as to which source Employee will receive compensation from."
The reason this appears is because as a consulting company, our employees sometimes will work directly for a client. In this case, the Client wanted employee on his payroll to assist with immigration requirements.
2) Consulting Agreement - There is an agreement between the Company and the Client. This agreement outlines terms of the agreement, including a flat-fee each month payable to the Company for services. As part of this agreement, it was mentioned that Company "may at it's discretion" provide various resources to Client, which may include having a Company employee working directly for Client & going through their payroll.
Statements:
So, let's say that the contract between Company & Client stated that Client was to pay Company a flat-fee of $100 per month. This is clearly identified as the Consulting Fee for all services within the agreement.
A couple of months into agreement, Client asked if employees could be paid directly under his company. Per my agreement with Employee and Client, I was open to providing this favor for the Client. From this point forward, the employee was paid via the method of the Client. This includes Client taking necessary taxes out of employee's checks.
Employee X is paid $10/month. Client takes required taxes as W2 employee so Employee has net of say $8/month. Employee X would not have taken $10/mo in salary if being paid via Company. They may have taken $5/mo or $4/mo...whatever...or they may have been paid as contractor or they may have had expenses paid, etc...
The contract between Company and Client was to pay $100/mo. The contract was not to pay company $100/mo minus whatever taxes were a result of Company allowing employee to be processed under Clients payroll.
Here are questions:
1) This seem very simple. If our contract was for $100/mo. Does the client owe Company $100/mo?
2) As a consulting company, I think it is clear that the NET sum paid to Company should be $100/mo. In the above example, the net payment to employee of $8 is applied against the $100/mo owed, but not the $2 tax/mo. The client wants to claim that the x% he has to pay in employment taxes should count against the $100/mo. As logical as that sounds, it is counter to the $100/mo agreement we entered into. Am I thinking through this correctly?
When you look at it as $60,000 instead of $100, the number becomes significant. Obviously, Company would not have allowed employee to be paid via Client if Company knew the X% was at risk.
Advice and clarification are welcome. Thanks.
Good afternoon. Please bear with me and let me lay out situation that advice is needed for.
I own a consulting company, formed as an S-Corporation ('company') in the State of GA. We obtained a client from out of the country who was establishing a US-based office selling IT services. To assist this client, the Company was to provide certain services including taking some steps to assist them in their immigration process.
There are 2 agreements that are relevant.
1) Employment Agreement/Confidentiality Agreement - There is an agreement with the employee which outlines the hiring of employee as an employee of the Company. Within this agreement, the following statement appears:
"Occasionally, the employee may receive compensation according to this agreement directly from a client or customer. It is understood that any compensation from any source as it relates to employees position will be considered fulfillment of this agreement. Employer will have sole and final determination as to which source Employee will receive compensation from."
The reason this appears is because as a consulting company, our employees sometimes will work directly for a client. In this case, the Client wanted employee on his payroll to assist with immigration requirements.
2) Consulting Agreement - There is an agreement between the Company and the Client. This agreement outlines terms of the agreement, including a flat-fee each month payable to the Company for services. As part of this agreement, it was mentioned that Company "may at it's discretion" provide various resources to Client, which may include having a Company employee working directly for Client & going through their payroll.
Statements:
So, let's say that the contract between Company & Client stated that Client was to pay Company a flat-fee of $100 per month. This is clearly identified as the Consulting Fee for all services within the agreement.
A couple of months into agreement, Client asked if employees could be paid directly under his company. Per my agreement with Employee and Client, I was open to providing this favor for the Client. From this point forward, the employee was paid via the method of the Client. This includes Client taking necessary taxes out of employee's checks.
Employee X is paid $10/month. Client takes required taxes as W2 employee so Employee has net of say $8/month. Employee X would not have taken $10/mo in salary if being paid via Company. They may have taken $5/mo or $4/mo...whatever...or they may have been paid as contractor or they may have had expenses paid, etc...
The contract between Company and Client was to pay $100/mo. The contract was not to pay company $100/mo minus whatever taxes were a result of Company allowing employee to be processed under Clients payroll.
Here are questions:
1) This seem very simple. If our contract was for $100/mo. Does the client owe Company $100/mo?
2) As a consulting company, I think it is clear that the NET sum paid to Company should be $100/mo. In the above example, the net payment to employee of $8 is applied against the $100/mo owed, but not the $2 tax/mo. The client wants to claim that the x% he has to pay in employment taxes should count against the $100/mo. As logical as that sounds, it is counter to the $100/mo agreement we entered into. Am I thinking through this correctly?
When you look at it as $60,000 instead of $100, the number becomes significant. Obviously, Company would not have allowed employee to be paid via Client if Company knew the X% was at risk.
Advice and clarification are welcome. Thanks.