1099 irs form every year B u s i n e s s F i n a n c e

1099 irs form every year B u s i n e s s F i n a n c e

I’m working on a business law multi-part question and need an explanation and answer to help me learn.

1. David owns and operates an accounting office and hired Sara 2 years ago to help with tax returns and client files. One day, David tells you, “I got a letter from California’s Employment Development Department alleging I failed to withhold employee payroll taxes but Sara is not my employee – she’s an independent contractor and I send her a 1099 IRS form every year. I don’t get it, why would they say she’s an employee?”

1. How would you educate David to know whether Sara is an employee or independent contractor?

2. Also, in brief 2-3 sentences, what is the consequences with respect to contract and tort liability to David whether she is or is not an employee?

2. David closes his accounting practice and wants to get into the fried chicken business. He asks you, “I went online and read about sole proprietorships, general partnerships, and corporation. You took business law at SUN – tell me the three basic advantages and disadvantages between these entities so I know which to choose?”

A. How would you respond to David?

3. Imagine David decides to set up a corporation and comes up with a catchy name, “Dave’s Hot Chicken Inc.” This corporation is made up of 5 directors (David himself, Kim, Brittany, Tina and Brian) who are also officers. The shareholders are family members who together invested $20,000 in the business. One day, David learns that Brian has been promoting his own chicken business online and David informs the other board members. Also, the board unanimously (and randomly) voted to expand and get in the technology business by authorizing the company to purchase $200,000 of cellphones from China which is a business that none of the board members know anything about nor did they do any research before voting. The shareholders (family members) are upset the board voted to get into the tech business when it has nothing to do with the corporate mission, which is fried chickens. The shareholders will lose their investments for this careless decision.

A. As for Brian, has he done anything wrong? If so, discuss.

B. What can the shareholders do with respect to the board of director’s decision to get into the construction business? Do the board of directors have any defense they can raise?

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