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From idea to replacing full-time salary in 4 months

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Re: From idea to replacing full-time salary in 4 months

#101

Post by qeorge »

dangrossman wrote: post #10
patio11 wrote: post #8

Earlier quoted context omitted.

They're unambiguously employees - classifying them as independent contractors is illegal, and both the IRS and their state's labor board will take violent exception to it. This isn't the only problem: the post would make a great issue spotter for an employment law class.

I haven't read every comment he's made yet, but skimmed many of them... Why can't they be contractors? He said they're providing their own transportation and supplies. So he's just handing them clients and appointments, and a checklist of cleaning tasks to complete and a few limitations on the supplies used. Isn't that analogous to handing a contracted software developer a requirements document and a deadline?

An easy litmus test:

Would it be OK for the cleaner to subcontract the work?

If so, it could be legit. If not, they're employees. From the original thread, I don't get the impression he'd be OK with subcontracting, so he is probably non-compliant.

That said, I don't think its a huge deal. He'll get audited, he'll pay the owed taxes and penalties and move on with his life. I've been audited by the ESC, its really not that big of a deal.

He's also learned that his customers will pay a premium for good service, so if he has to raise the price, big deal. He'll be fine.

Re: From idea to replacing full-time salary in 4 months

#102

Post by qeorge »

edw519 wrote: post #53

This time next year on reddit: "From working my ass off 90 hours per week running a business that wouldn't scale to nice salary/benefits for 40 hours. I'm taking home the same net and I feel like I'm on vacation." I don't want to sound too snarky and I really admire OP's initiative and ability to make things happen, but this just doesn't smell right. It's easy to get excited by nice revenue in the beginning (as he sh…

Incoming anecdote..

My uncle, Peter Dussmann, started out cleaning offices, then started an office cleaning company, than bought an office building...now he owns one of the largest service companies in the world (50k+ employees).

http://de.wikipedia.org/wiki/Dussmann

When you make money it opens up other opportunities. How you leverage them is what matters.

That said, I'm 1000% Uncle B.

Re: From idea to replacing full-time salary in 4 months

#103

Post by [deleted] »

tptacek wrote: post #76

He's not withholding. Chances are good his workers aren't paying taxes either. According to the manual the IRS uses to train its worker classification auditors, the three most important factors are: Instructions to workers: Your worker is probably an employee if you require him or her to follow instructions on when, where, and how work is to be done. This is a very important factor. However, if you tell your electric…

[deleted]

Re: From idea to replacing full-time salary in 4 months

#104

Post by patio11 »

rsynnott wrote: post #63
chc wrote: post #5

Earlier quoted context omitted.

Are you saying you think it's illegal for the maids to be 1099 workers?

I'm not sure about America, but in most countries I'm familiar with, it is ultimately the decision of the tax authorities whether people who work for a company are employees or contractors. There's generally a well-specified test for this. Certainly, in this country, the maids would be unambiguously employees.

The US regulations are terribly vague, depend heavily on facts-on-the-ground, and can turn on minutiea like who gets cake on their birthday (so not making that up). That said, even for a law which has more edge cases than a course on graph theory, this case is not a close call.

Re: From idea to replacing full-time salary in 4 months

#105

Post by asmithmd1 »

achompas wrote: post #95
asmithmd1 wrote: post #71

Earlier quoted context omitted.

Another point why this result may not be typical of attempts to duplicate this business in other parts of the country is that he is doing this in Washington DC, the epicenter of where cash is being artificially injected into the economy by defecit spending. Silicon Valley, DC, and NYC exist in a different world from the rest of the US

You're right about DC having a regional effect, but wrong about "cash being artificially injected," especially since deficit spending has very little impact on DC's economy (think lobbying and consulting). I lived in DC for a few years and there's a strong work + happy hour culture for young professionals. It's pretty standard to hit the bar after work and get home at 9-10pm on any weeknight. The result: a group of t…

Government spending IS spent in the DC area. Every government contractor has major offices if not outright headquartered in DC area. For example: Northrop Grumman, CSC, Lockheed Martin, and General Dynamics are all headquartered there. Any new bureaucracy finds offices in the region - TSA's 4000+ headquarters employees are in Northern VA.

I know I am going off on a tangent but since 2008 the US government has been spending $1,300 billion more than it collects each year! Instead of spending that in the DC area why not just send a check for $10,000 to each and every household in the US. Of course these numbers do not include the TARP cash that is deluging Wall St.

Re: From idea to replacing full-time salary in 4 months

#106

Post by septerr »

Some of the best things of MIB -

-------

Organizing

We can organize your closet (in whatever way you would like), and thoroughly clean and organize the items in your kitchen, or even spend time restoring your china to their full glory.

Refrigerator / Freezer Cleaning We’ll dispose of expired items, & remove racks and compartments to deep clean them as well as the walls of the fridge.

Errand Services

Need a personal assistant for the day or just need someone to drop your car to the mechanic or to run to the mall for you? Name it and we’re there to take care of any errands you may have. $60 for first two hours ($35 per hour after).

-------

Clean is something people like. To people like me it gives peace of mind and freedom to think and work on other things. But cleaning is something a great many of these people don't like to deal with. A cleaning service has to be a moneymaker.

Re: From idea to replacing full-time salary in 4 months

#107

Post by obtu »

turkeyman wrote: post #39
guynamedloren wrote: post #32

Earlier quoted context omitted.

Hmmm... that's an interesting (and scary) point. I wonder if it would make sense, from the business owner's perspective, to shuffle the employees around between clients to decrease the chances of this?

That seems like it would just delay the inevitable, he needs to find competent cleaners that are unwilling to strike out on their own. If he manages to keep the cleaners as contractors, then his future will be absolutedomestics.com.au. They have done incredibly well for themselves and have set themselves up exactly as this guy has. I'm thinking it must be more profitable making a decent profit while losing clients an…

The higher-profit-per-employee option might be more vulnerable to competition, by self-employed cleaners or by someone with a similar business model.

Re: From idea to replacing full-time salary in 4 months

#108

Post by obtu »

pbhjpbhj wrote: post #52
turkeyman wrote: post #39

Earlier quoted context omitted.

That seems like it would just delay the inevitable, he needs to find competent cleaners that are unwilling to strike out on their own. If he manages to keep the cleaners as contractors, then his future will be absolutedomestics.com.au. They have done incredibly well for themselves and have set themselves up exactly as this guy has. I'm thinking it must be more profitable making a decent profit while losing clients an…

> competent cleaners that are unwilling to strike out on their own // Or get his subcontractors (ie the cleaners themselves) to accept a non-compete, possibly with a specific figure attached should they jump ship.

Those aren't necessarily legal (and might be ill-received in a region that doesn't want more unemployment); on the other hand, making use of the whole rolodex after leaving might be regulated as well.

Re: From idea to replacing full-time salary in 4 months

#109

Post by tptacek »

bhousel wrote: post #97
tptacek wrote: post #76

He's not withholding. Chances are good his workers aren't paying taxes either. According to the manual the IRS uses to train its worker classification auditors, the three most important factors are: Instructions to workers: Your worker is probably an employee if you require him or her to follow instructions on when, where, and how work is to be done. This is a very important factor. However, if you tell your electric…

You are correct that the maids are employees, but since he only just started this business, it seems like a very fixable problem to convert them to employees. I ran some numbers on a free paycheck calculator site (paycheckcity.com) and assuming the following: Washington DC, wage of $20/hr, 30 hrs/week, married (2 exemptions), the numbers come out to: Weekly Gross Pay $600.00 Federal Withholding $29.81 Social Security…

If his current employees are 1099, they're paying SECA, and the numbers are 2x this. If he switches to W2, he'll pay half of FICA, and the workers the other half... but now his job offer is significantly less attractive.

He also owes $187/yr for uninsurance per employee.

Dealbreaker? No idea. Obviously people do make a living running housekeeping services.

Re: From idea to replacing full-time salary in 4 months

#110

Post by tptacek »

DanielBMarkham wrote: post #93
tptacek wrote: post #87

Earlier quoted context omitted.

Someone is paying FICA taxes. If the maids are 1099 employees, they're paying both halves of it. That's "self-employment tax". It's very expensive; around twice what employees pay. The prevailing rate right now for "qualified" housekeepers in the DC metro area is $9.80/hr. Even if he's "generously" giving them $20/hr (if a 1bdr apartment takes 2 people 1 hour to clean, then according to his price list that means he's…

Someone is paying FICA taxes. I think you're arguing semantics here. Yes, everybody pays FICA, but for most people who are working their own business at a lower income FICA is offset such that no taxes are owed at the end of the year. So while you "pay it", it's not like that means much (insert long discussion here about complex tax systems) Even if he's "generously" giving them He doesn't have to give them anything.…

Wait, what?

Someone is paying FICA taxes.

I think you're arguing semantics here. Yes, everybody pays FICA, but for most people who are working their own business at a lower income FICA is offset such that no taxes are owed at the end of the year. So while you "pay it", it's not like that means much (insert long discussion here about complex tax systems)

What is the FICA/SECA offset you're talking about here? It is not my impression that maid services don't pay FICA.

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