• July 2018
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Is it ok to pay a consultant a one time flat fee to do a startup milestone and not minimum wage (which I can’t afford to pay)?

Yes to answer your question, but I see a more glaring issue – the need to incorporate! You should incorporate today honestly. I know it is tempting to say “I’ll do it later” when you think of formally structuring your company. There is simply so much going on in the early stages of a new company that something that seems administrative can be put on the back burner. Well this is a huge misconception. Incorporating your business is one of the first things you should do in order to protect yourself and your business’ livelihood. Businesses typically incorporate in order to limit personal liability. If your startup remains a sole proprietorship and you face a lawsuit then your personal assets can be at risk. On the other hand, if your business is incorporated then only the corporation can be held liable (unless corporate veil is pierced!)

Back to your question though – yes this a common way for a startup to have work completed by a consultant. There is some risk for classifying someone as a consultant if they are, in actuality, an an employee of yours. It’s important to allow the consultant to retain the majority of control in terms of how the work is completed (tools, hours, direction, uniform etc.) in order to stay clear of initiating an employer-employee relationship. However, if this individual is truly a consultant then it is totally fine to pay them according to a milestone versus minimum wage. Be sure to keep track of your payments to him/her as you will need to provide them with a 1099 come tax season.

LawTrades works with startups on a daily basis by connecting them with experienced business attorneys to complete their legal work. We offer low-cost incorporation packages so that you can be personally protected within days of hiring an attorney from our site. Take a look and see what we have going on!

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