Bookkeeping and Accounting Setup
Assess whether your new business has a bookkeeping system, chart of accounts, and process to keep clean records from the start.
Open the free tool
For founders, new owners, and anyone starting out
Worker Classification at Formation
Screen whether the people helping your new business are employees or contractors, and what to confirm before you pay them.
5 guided steps
Private in your browser
Official guidance links
Start the free checker
Your free guided checker
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
Informational business-formation diagnostic only; not legal, tax, accounting, or investment advice. Confirm entity, tax, and state decisions with a qualified attorney and CPA.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Do you control how, when, and where the work gets done - setting the hours, methods, and sequence rather than just agreeing on the end result?
Behavioral control over the details of the work is the single strongest signal of employee status under the IRS common-law test.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IRS independent contractor or employee
Is the work core to what your business sells or delivers, rather than a specialized or one-off project outside your main line?
Work that is central to your business, done under your direction, points hard toward employee - a delivery business directing its drivers is the classic example.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IRS independent contractor or employee
Does the worker run their own business - using their own tools and methods, setting their own hours, and serving other clients besides you?
A genuine contractor is an independent business bearing its own risk of profit and loss; if this is really just your worker without the control, they lean employee anyway.
Treat the worker as an employee - set up W-2 payroll and withholding.
Official guidance: IRS independent contractor or employee
Do you operate in a state that uses a strict ABC test - such as California - where a worker is presumed an employee unless all three prongs are met?
In ABC-test states the default flips: the burden is on you to prove independence, and work within your usual course of business almost always fails prong B.
Apply the strict ABC test - assume employee unless all three prongs clearly pass. Treat as an independent contractor - issue a 1099 and document the relationship.
Official guidance: IRS independent contractor or employee
Are you currently paying these workers as 1099 contractors, or planning to, even though you direct their day-to-day work?
Paying an employee-in-substance on a 1099 is the specific setup that creates back-tax, penalty, and interest exposure if the IRS or state reclassifies them.
Fix the classification before back-tax and penalty exposure builds up. Treat the worker as an employee - set up W-2 payroll and withholding.
Official guidance: IRS independent contractor or employee
Want a professional to confirm your answer?
Send us your situation and one of our senior CPAs will review it with you - fixed fee, no surprises.
Contact Us