Hiring employees in a management company

[Grant Kemp]

I've started a property management company and need to hire on an employee to help handle the load, but I'm having trouble figuring out HOW to actually hire them. I have the person already lined up and ready to go, but I want to do this the right way.

So far it seems I will make them a w2 employee, but I want to be able to pay them according to how many properties they're working on, and not pay them hourly. We're obviously just starting out, and I only have about 20 properties ATM, which does not allow me to pay them enough to qualify as an exempt/salaried employee. Is the only other employment option "hourly"?

In short, how should I structure my employee's pay when I want to pay them 3% per property they help manage? (in Texas)

Thanks!

[Nate Garrett]

Hi Grant Kemp.

Why not hire them as an independent contractor? You can pay commission only based on number of properties managed initially and bring them on later on as a W-2 employee when the business expands.

Here's some good reading from the IRS to make sure you can legitimately treat them as an IC: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F

On your website it says you are managing for 6%. Is that single family? Are you charging a leasing commission?

Best of luck on your venture.

Nate

[Grant Kemp]

The reason I wasn't going 1099 is because, as far as I can tell, the IRS wouldn't let me qualify them as such since I "have the right to control what the worker does and how they do their job". Because of their definition of "employee" it seems I need to w-2 her. Thus the conundrum

[Joe Bertolino]

I would look at paying minimum wage + monthly bonus to get them to the agreed amount. I run into these issues in my insurance agency and it will be a payroll headache for you.

[Nate Garrett]

I agree with Joe. If you can't categorize her as an IC, pay minimum wage and a bonus, perhaps based on number of properties they are managing.

[Steven Hamilton II]

I concur on the minimum wage plus bonus. If performance is satisfactory then that should be perfect. Make sure there are paying tenants and it is being managed correctly. You could even structure it as a percentage of rent.

-Steven

[Pat L.]

I would definitely do everything you can to make them a 1099.
Your PM LLC/Company etc should remain a separate entity.
You W2 them & workers comp, unemployment etc could eat you alive. Esp if they ever get injured or you need to fire them or they become a liability.
Just the accounting for a W2 employee is an added expense & a pain.
You also negate the ability to do a solo401(k) & to do a 401(k), SEP, IRA etc you have to match them to some degree after a the prescribed probationary period.
We now have several on call as some are better &/or more reliable than others depending on the job(s) required.
Been there done that.........no thanks!!!
but then again we are in New York!!