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ISSAQUAH LAW GROUP   PERSONAL INJURY LITIGATION LAWYERS

Issaquah Law Group - Injury Litigation Attorneys

TRUST: Personal injuries are personal. Which is why the attorneys at ILG treat every client and every case differently. Because they are different, and extremely personal. ILG was founded on the principle that strong client relationships are the key to successful legal representation and strong relationships are built on trust. Trust that you will be heard. Trust that you will be protected. Trust that every effort will be made to see justice done in your case. The singular goal of every ILG attorney is to earn and preserve that trust.

EXPERIENCE: 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 and we bring this experience to bear on behalf of our clients in personal injury and wrongful death claims arising out of motor vehicle accidents, bus versus pedestrian accidents, defective and dangerous products, medical malpractice, slip/trip and fall accidents, and catastrophic losses due to fire.

LOCATION: We are located on the Eastside in Issaquah, convenient to Bellevue, Redmond, Kirkland, Renton, Sammamish and North Bend. However, we provide legal services in King County, Pierce County, Snohomish County and throughout the entire state of Washington.

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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