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Comment by spolsky | Hacker News Reader

Good luck with that. The IRS has very specific rules for who can be considered an employee and who can be considered a contractor. Attempting to treat people who should be employees as contractors is one of their number one enforcement goals, because contractors don't have withholding and are therefore far less likely to pay their taxes.

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The IRS has very specific rules for who can be considered an employee and who can be considered a contractor

Actually the IRS has very vague and inconsistent rules about who can be considered an employee or a contractor. Look them up and manufacture facts and documentation to stay as far on the right side as you can.

Would that matter, as long as the contractors only work one of projects which are time limited?

It depends on the degree of control you exercise over the individual, if the individual is offering their services to the public, if the individual furnishes their own tools to perform services, if the individual performs services in their own facilities or yours, among other factors[1] weighted differently in each situation.

PDF warning: [1] http://www.irs.gov/pub/irs-utl/x-26-07.pdf see pages 3-5

There is some specific legislation for software contractors that was passed in 1986 that make it difficult for them to be independent contractors who work solely for one company. The IRS is pretty active about enforcing it.

This is why most companies hire software contractors via companies who employ multiple contractors, and never directly.

Not a problem assuming you're fine with 100% staff turnover.

http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...

Meh, I think it requires a truly different relationship but it can totally work if both sides are mature about it. Usually though, the contractor gets lazy or the employer wants more control. Then you have no choice but to make them an employees so you can direct them.

Edit: just read your top-voted post. If you can swing it, definitely go for it. I just think it is way too much paperwork and a bootstrapped startup probably couldn't afford it.

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