My question involves business law in the state of: CA
Hello and thank you in advance for your assistance!
I own a salon in CA. For the last 11 years I have treated our stylists who get paid on commission as independent contractors/1099. I hand-write them checks biweekly for a straight commission of their service sales performed. I do not take out taxes or have worker's compensation for them (I do for my front desk staff, however). This was the industry standard for salons for a long time, even though it was a gray area. However, in light of the recent Dynamex rulings, I no longer feel that this is a safe and legal way to run my business and am looking at options to resolve the legality of my business structure. Obviously making my stylists renters or employees would be one way to resolve this. But this would negatively impact both mine and the stylists' income, and present major cultural challenges for my business. (Not impossible, but definitely not preferable.) However, my business lawyer has presented another option that does not seem very common, and I am looking for advice from other lawyers as to the legality of his suggestion:
My lawyer has suggested creating a Manager-Managed LLC, where I am the Manager and the majority stakeholder and my stylists are the Members, splitting 1% of the company amongst them all (18 or so). So they would each own 1/18 of 1% and would simply buy-in to the business for $100 each. He said that we could structure their normal commissions on services to be payouts for their membership in the LLC, so that we would not have to change the amount or the way anyone gets paid. Does this sound like it could work? Is there anything I should take into consideration when contemplating converting us to this model?
Hello and thank you in advance for your assistance!
I own a salon in CA. For the last 11 years I have treated our stylists who get paid on commission as independent contractors/1099. I hand-write them checks biweekly for a straight commission of their service sales performed. I do not take out taxes or have worker's compensation for them (I do for my front desk staff, however). This was the industry standard for salons for a long time, even though it was a gray area. However, in light of the recent Dynamex rulings, I no longer feel that this is a safe and legal way to run my business and am looking at options to resolve the legality of my business structure. Obviously making my stylists renters or employees would be one way to resolve this. But this would negatively impact both mine and the stylists' income, and present major cultural challenges for my business. (Not impossible, but definitely not preferable.) However, my business lawyer has presented another option that does not seem very common, and I am looking for advice from other lawyers as to the legality of his suggestion:
My lawyer has suggested creating a Manager-Managed LLC, where I am the Manager and the majority stakeholder and my stylists are the Members, splitting 1% of the company amongst them all (18 or so). So they would each own 1/18 of 1% and would simply buy-in to the business for $100 each. He said that we could structure their normal commissions on services to be payouts for their membership in the LLC, so that we would not have to change the amount or the way anyone gets paid. Does this sound like it could work? Is there anything I should take into consideration when contemplating converting us to this model?
Manager Managed LLC for Salon
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