From idea to replacing full-time salary in 4 months

The city and state his business is headquartered in (he's in DC Metro so it could be any of a bunch) is also going to tear into him for unemployment taxes and fees. We had drama with this even though we don't even have independent contractors.

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 electrician you want blue switch plate covers instead of white, you are not exercising control to a degree that would make the person an employee.

Job training: If your company provides or arranges for training of any kind for the worker, this is a sign you expect work to be performed in a certain way; therefore, the worker is your employee. Training can be as informal as requiring the worker to attend meetings or work along with someone who's more experienced.

Worker's ability to make a profit or suffer a loss: An employee may be rewarded, disciplined, demoted, or fired depending on job performance, but only an independent contractor can realize a profit or incur a financial loss from his or her work. In other words, an employee will always get paid; an independent contractor, however, has a financial stake in his enterprise.

Also:

Importance of the worker's services: If a worker provides services that are integral to the success of your business, the worker is likely your employee.

Personal performance of services: An independent contractor should have the freedom to hire assistants or subcontract work to other workers or firms at his or her expense (this is where profit or loss could enter the picture). If you require the worker to perform the work personally, that's a sign of control and therefore indicative of employee status.

Ouch.

This scheme is going to work until he starts issuing 1099s and the government (maybe after months or years) notices them and goes after the workers for their (extremely expensive) self-employment taxes. Which, because they're probably making the prevailing rate for housekeepers (high teens per hour) is going to threaten to drive them into bankruptcy and thus cause a stink.

Yes the cleaners are probably not doing anything differently than they normally did. BUT:

-the cleaners had problems finding clients -clients had trouble finding good cleaners

If you've ever tried to find one of these folks, it's a total PIA. Basically it involves asking your friends or posting to craigslist and then wading through a bunch of crap. This is easy - find and pay online!

If you're against "extracting value" here, you should also be against grocery stores. Surely they are robbing the poor farmer by linking buyers and sellers?