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ISSAQUAH LAW GROUP

Issaquah Law Group: Experienced Counsel; Client Focus

PHILOSOPHY: Formed in 2014, Issaquah Law Group is a law firm with one focus: providing businesses and insurers with high quality legal representation with the responsiveness of a smaller firm. ILG was founded on the principle that strong client relationships are the key to successful legal representation and strong relationships are built upon clear and consistent communication. 

LITIGATION: We work closely with our clients to fully and accurately understand their goals, work collaboratively to formulate specific legal strategies, and execute the agreed plan of action utilizing methods most likely to result in the efficient and effective resolution of the matter. ILG attorneys have a broad base of litigation experience to draw on in all Federal and State courts from on-the-ground investigations to Supreme Court appeals in the areas of personal injury and wrongful death, product liability, commercial general liability, labor & employment, construction litigation, and catastrophic losses due to fire and explosion.

BUSINESS LAW: Rarely is the path from point A to point B a straight line, so our role in a business law practice is to find alternatives, devise workable strategies, and keep your business ideas, goals and objectives moving toward realization. ILG’s business attorneys help clients achieve their goals with respect to business formation, intellectual property, labor and employment, CAN-SPAM, copyright and trademark

COMMUNITY: In addition, the Lawyers at Issaquah Law Group remain active in the legal and civic community. A core commitment of our Issaquah Attorneys is community service. Our attorneys' civic involvement includes the King County Civil Rights Commission; the City of Issaquah Planning Policy Commission; the Northwest Screenwriters Guild, service as a pro tem judge. We live and work in the Pacific Northwest, and we aim to make it a better place.

In addition, through The Amateur Law Professor Blog and LinkedIn postings, we share pertinent opinions and decisions of the Washington State Supreme Court, as well as the pertinent opinions and decisions of the Washington State Courts of Appeal so that our clients can be as update to date on cutting legal issues as we are.

Division III: Improper Association Agreement Leads to Back Employment Tax Payment

DeFelice v. Employment Security Department

A doctor had been operating as a sole proprietorship. He associated with two other doctors, but neither one joined as a partner. Rather, they were paid out of 1099s, billed through the office, and were otherwise treated as employees. The Employment Security Department held that the evidence supported the finding the doctors were employee and not partners:

Ms. Hughes' review revealed (1) the dental practice was registered as a sole proprietorship with both the Department and the Washington Department of Revenue, (2) Dr. Armand listed the dental practice on his tax returns as a sole proprietorship, and (3) payments made to Drs. Loretta and Louise were reported as miscellaneous income on Internal I Revenue Service (IRS) Form 1099s. She concluded Drs. Loretta and Louise were employees of the dental practice and unemployment insurance taxes should have been 1 paid. The Department issued Dr. Armand an order and notice of assessment requiring him to pay $1,896.37 in back taxes, penalties, and interest. Dr. Armand first administratively appealed. 

The Court of Appeals agreed with the auditor (and the administrative law judge who adopted the auditor's findings. The doctor believed that because the associated doctors were paid a portion of the profits, that meant they weren't employees. However, employees can be paid a portion of profits and still not be partners. Rather, you need an agreement to share not just in the good years, but in the bad years, absorbing any losses. It didn't help the doctor's case that his association agreement with the two other doctors explicitly stated they were not partners. As such, they were employees receiving a portion of the profit, and employment security taxes should have been paid. 

When forming a business, or bringing new people into a business, it is important  to divide responsibilities and ensure that the partnership is structured to maximum tax advantage, to ensure not only the best outcomes for all involved, but to also avoid pitfalls associates with mistakes. Allow Issaquah Law Group to help you with any formation or expansion of your business.

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