Social Question

RedDeerGuy1's avatar

Are business owners exempt from minimum wage laws and overtime?

Asked by RedDeerGuy1 (23477points) April 20th, 2019

Is it a work around to avoid paying minimum wage and overtime laws by making all employees part owners?

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12 Answers

seawulf575's avatar

You could just make them all salary positions. OT goes away. But typically, businesses (especially small businesses) just make jobs part time to minimize payroll expenses. I would hesitate to make all employees part owners because of the headaches you would have later on. If you make me a part owner and I decide I no longer want to work at that job, now I am entitled to a percentage of the value of the business. And realistically, as soon as you sign the papers making them part owners, they could walk and you would owe them.

RedDeerGuy1's avatar

@seawulf575 Didn’t West Jet try that 20 years ago? I casually searched Wikipedia and didn’t find any talk of it.
Did any company try it? How did it work out?

LostInParadise's avatar

No. Being an owner is different from being an employee. I am a part owner of a few companies because I own stocks in them. If I went to work for one of them, I would still be required to receive minimum wages.

ragingloli's avatar

Were you to make all employees “part owners”, assuming it would come with all the decision making rights, that would be literal socialism.
Just FYI.

LostInParadise's avatar

@ragingloli , You don’t have to live under socialism to have worker owned companies. There are several in the U.S. The largest worker owned company is Mondragon in Spain.

MrGrimm888's avatar

If a business owner is a contractor, and their employees are subcontractors, they don’t have to meet lots of standards.

JLeslie's avatar

In America, owners are supposed to be paid what is reasonable for the work they do according to the law. Let’s say you own a car repair shop, and the typical pay is $18 an hour. That’s what you should pay yourself to avoid red flags. Start up businesses can get away with being in the red, but after 2–3 years the government expects owners to be making reasonable pay and profit.

The IRS prefers an owner be a W2, not a 1099. I’m not sure how strict that is. I know the accountants who have done the taxes for my boss, she owns the business, always advises her to get paid through payroll rather as a subcontractor. In the business I owned we were told to pay ourselves reasonable and fair pay for the work we do.

Owners have a lot of vehicles to put money in funds to avoid taxes. IRA’s and/or 401k’s.

If you want to have SS when you retire, you have to pay in. If you use every vehicle to shield your earnings from taxes, then you also will be lowering your SS. Eventually, you will likely regret it, unless you are found a really good job of saving.

Love_my_doggie's avatar

Labor laws protect rank-and-file employees, not business owners. If the owner chooses to work 80 hours per week for little pay, s/he is free to do so.

Zaku's avatar

In the US, self-employed business tax tends to be a worse deal than getting paid to work for someone else, it seems to me. You don’t have to worry about minimum wage or employee laws, but the business tax rate is high at least for people who haven’t figured out some way to have major expenses and deductions or whatever all those tax lawyers do that seem to be worth it to huge corporations which somehow avoid paying tax.

snowberry's avatar

Edited. I live iIn the US. I used to run a cleaning business. I was the only employee because I wanted to keep it simple and part time. The rate for cleaning services in my area was $15 to $20 an hour. Once, one of my friends asked me to clean for her, and asked me to charge her less than the lowest rate. She was a good friend, and I wanted to charge her less, but the government taxed me a flat 30%. I was expected to save my receipts for cleaning supplies, as well as keep a mileage log of how far it took me to travel to and from each job, and write that off on my taxes. She lived a few doors away from me, so I couldn’t even write off gas mileage because she lived so close. The government would tax a full 30 percent off of the $15 an hour, and if I lowered the rate below $15 an hour, which would take my actual wage well below $10 an hour.

I told her I wanted to lower my rate, but if I did then it would be better if I just worked for for free.

Love_my_doggie's avatar

^^^ What type of tax was the flat 30%, and which level of government imposed it?

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