Hiring is a big milestone in your business! Sometimes it’s just not possible to do everything. Choosing to hire a full-time employee (W2) vs. a contractor (1099) is an important decision and should be discussed with a Tax Professional.
If you expect the person to only work for you, to be at a certain place for a certain amount of time, and they will not be invoicing you for their services, they are a W2 employee. When you hire a W2 employee, you are responsible for paying half of their Social Security and Medicare taxes, unemployment, and workers’ compensation insurance. Also, any full-time employee will be eligible for any benefits you offer yourself as an employee of your business, possibly limiting your access to retirement accounts.If the person you are working with is more task-based, where you set a goal and a deadline, and that person invoices you for the work and retains the ability to work when, where, and how they want to, that person should be issued a 1099. As a 1099 contractor, they will be responsible for all of their Social Security and Medicare taxes, you will not need to pay unemployment or workers compensation insurance, and there is no expectation of continuous work unless explicitly written in their contract. You are not required to offer a contractor profit sharing, retirement, or insurance benefits; so, you will keep your access to certain plans like a Solo401k.