QUESTION

Who decides, or who should I contact to find out if I would pass the ABC / Borello test as an independent contractor living in California under AB5?

Asked on Apr 26th, 2021 on Labor and Employment - California
More details to this question:
I am interested in becoming an independent contractor offering data entry, transcription, virtual assistant, etc. services. However I live in California, and I am concerned that the kind of work I want to do would not pass the ABC/Borello test under the new AB5 law. I would envision finding my own clients, and have my own website and business license. I have heard from many people who have done this kind of work that they have all lost their clients because clients are afraid to hire independent contractors in California because of AB5, and because of the fines that could be imposed on them if the independent contractor they hired were misclassified. Is there *any* governing or certifying body that could review an independent consultant's business, or business idea if it is not launched yet, to determine whether or not it would pass the ABC/Borello test under AB5? I have contacted tax professionals and the EDD, and neither was able to help. Any advice appreciated. Thank you!
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1 ANSWER

Business Litigation Attorney serving Oakland, CA
Partner at Bay Oak Law
3 Awards
You are definitely on the right track here. Being an independent business (either as a sole proprietor or partnership, or as a corporation or limited liability company) is an important factor in determining whether your business is really an independent contractor. If you choose to be an independent contractor, you can control the factors that would be used to determine whether you are an independent contractor. 1. Make your business "official" -- get a business license from your locality (city or county). Yes, it's a hassle, but it helps show that you are an independent business. This is true whether your business is a sole proprietorship, partnership, corporation, or LLC. Talk to your accountant and bookkeeper, as well as an attorney (if necessary), to see what would work best for you.  2. Have bank accounts in the name of the business, separate from your personal accounts, and make sure that proper bookkeeping is done for the business. Treat your business as a separate entity. If you withdraw cash from a business account for your personal needs, make sure that you treat that properly -- either as income, or perhaps as repayment of a loan you made to the business.  3. Have written contracts with your customers or clients.  Written contracts are good to show that your business is an independent business. You can write in the "ABC" test requirements into the contract, and that will go a long way to showing that you are a business. The contract can state that: A.  your business is responsible for getting the work done, and has the general right to determine how it is done; B. the work that your business will do is sufficiently different from the work of your client; and C. that your business customarily does this kind of work for other clients as well as this particular client.    
Answered on Apr 27th, 2021 at 11:57 AM

This answer does not mean I am your lawyer. No attorney-client relationship exists. This response is for general information only.

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