Can hired salespeople be considered subcontractors?

I have years of experience hiring subcontracted salespeople. You absolutely can 1099 them, just make sure that you are following the IRS guidelines for subs.

Basically you cannot tell them how to do their job, you can't treat them at all like they were an employee or that you are their boss. That sounds really bad but that's how the IRS views it.

"Commission only" is definitely the right way to pay them.

Best bet is to call IRS direct (expect some time in getting through) and they can tell you exactly what to do.

Biggest thing is to make sure they give you a signed copy of the 1099 form for you to have on file. It's the only protection you have if they don't pay taxes on 'commissions' you pay them.

Thanks,

John

Would anyone be willing to share an example of a sales contract that they have used?

I can't help with tax side of things with you being based in the USA.

But from my experience be prepared for a high turn over of staff. 1 in every 10 sales person you hire will be pure gold the rest will be rubbish the trick is to build a team of 10 gold sellers.

Although you don't want to micro manage them I would set 1 day a week where they come to your office or spend 2-4 hours on skype talking about plans and what they are doing. Lead generation and so on.

Id set up a list of targets, make it clear what happens when targets are met and what happened when they are not.

If the targets are missed 2-3 times in a row you fire them end of story they no longer work for you no matter what sob story they give you and believe me you will get a few!

When my sales guys hit the targets they normally have cash bonus, days out, weekend pass at the golf course etc, set up mini games for them to compete against each other etc winner gets a case of beer.

I do this all the time, as the sub. As the client, you have to stay away from the W2 definition. This means you can say what you want done and when you want it done by, but not how and exactly what time you want it done.

Thank you for this VERY useful post!

If you want them representing you're company the way you want them too, then you had better hire them as an employee, otherwise you cannot not dictate anything to them in regards to what hours they work, what tools or methods they use and you can't even tell them they can't offer your competitors services along side yours.

You can pay an employee commissions only as long as each pay period you at MINIMUM pay them minimum wages if their commissions do not meet or exceed the minimum wage multiplied by the hours they worked.

Hey Mike,

Don't give up! Here's what you do...

Have each sales rep set themselves up as a Corporation. LLC or S-Corp will do (stay away from C-Corp as that's double taxation). Although the LLC or Corp will run a few hundred dollars the SOLE PROPRIETOR is a great and cheap option. Here in Illinois one obtains a business license from the county you reside in.

If anyone wants to work "with me" they must incorporate or be a sole proprietor. It's that simple. What I do is I don't pay the sales reps anything until they comply. This is in agreement of course and they understand why.

Dennis

I have been looking for some commission only sale persons lately myself. I have found that most the top sales persons are getting paid some type of salary. Paying only straight commission is hard to find quality sales people.

You have gotten all the advice I would give you above except I would add, make sure not only to follow the IRS guidelines, but also the guidelines of your particular state which may be the same or more strict.

Also, absolutely make sure you get a signed contract with exactly what you are expecting and the time for completion.

You can get the basic contract online, just google it but I highly recommend you get the contract, spell out exactly what you are wanting and then run it by a lawyer who is well versed and has experience in this.

Then once the contract is signed, make sure to never violate the conditions by "requiring" anything of them that
1) violates the state or IRS rules or
2) is not covered in the original contract without getting a signed addendum first.

One more thing, it sounds scarier and more difficult that it really is. Like most business contractual matters, you just have to make sure you cross all your t's and dot all your i's.

The form is an I-9 for which one fills out to confirm eligibility to work in the U.S.