David,
This is NOT a legal response, but covers the guidelines I have used for paying contractors via 1099.

The basic requirements of an independent contractor are: Works on her own schedule, works at her own office (can be her home), provides her own tools and receives income from multiple clients. Since she is making relatively infrequent changes to your website, then she most likely qualifies, even if she works at your office.

However, SHE should take out a local business license and make sure that the IRS sees her as an independent business woman.

You will need to provide a 1099 in a timely manner each year and be prepared to show the IRS that she is not working regular hours each week for you. Because she used to be your partner you should have a written contract that she is no longer a partner but an independent contractor, working (as above) on her own schedule etc.

If you are having a lawyer draw up your sole proprietor papers you should get some definitive advice from him. If you aren't you might want to see a tax lawyer anyway. A few hundred for a consultation fee might save a lot more in time, aggravation and IRS payments later.

Just my $.02 non-legal suggestions....
Barbara


>Hi everyone,
>
>I'm having quite a dilemna over the status of the person who does my web site's development and maintenance. My web developer was my legal partner for about 3 years, until she decided that she no longer wanted the liability that goes along with being a co-owner. When she was co-owner (partner), She also helped me with software testing, administration, and marketing. After she ended her partnership status, I became sole proprietor of my business. Actually, I'm currently in the process of getting a new business license and establishing myself as a sole proprietor.
>
>Now, my former partner makes updates and changes to my web site on an infrequent basis. She does nothing else for my business, except service my web site on an infrequent basis. Since my current business income is very low, I can only afford to pay her on a percentage basis. We have an agreement that she will be paid 15 percent of every contract that I obtain, as long as she continues to service my web site when needed.
>
>My question is this: Given what I have just described, how will the government interpret the status of my web developer?? Is she an Independent Contractor, my employee, or would she still be considered a partner because she profits from every contract that I obtain?
>
>To be honest, I really want her to have the status of Independent Contractor. If she is an employee, I will be faced with a lot more administrative headaches with things such as tax withholding. If she is considered a partner, she will freak out because she doesn't want to be a partner. From my perspective, I can hardly consider her to be an employee or partner. However, I read the criteria that the IRS uses for determining somebody's status, and it's such a fine line that I'm completely confused. Does anyone have any thoughts about this or any advice? Is there a written agreement that we can make that would solidify her status as an Independent Contractor?
>
>Thanks for any help,
>
>Dave