This is our second case study on how to work around the diktats of Obamacare and assumes that implementation might take place in Jan. 2014. As we have said in previous posts, we doubt this will happen, but one never knows. There are lot of moving parts that have to be in place for it to get going, and most of them are not moving yet, or even showing signs of moving.
Here’s the case: a general contractor with 50 employees, exactly at the moment of this writing. Business is strong, and he wants to grow to where he was, but, again, doesn’t want to pay a minimum of $2,000 per employee in insurance costs. Present margins won’t permit it.
The contractor has two children, both competent and involved in his business, who will eventually probably take over the business.
An obvious solution is to hire only independent contractors, plus reclassify one employee, to get below 50, but this might arouse suspicion, since the contractor has a relatively visible profile, and reclassification might arouse the State Industrial Commission. We wouldn’t recommend this course.
Our thought right now is to split the contracting business into three parts, with each child responsible for one part, as well as the present head. This keeps present headcount below limits, as well as future growth.
The IRS rules on common ownership are a little murky, and they’re a little busy at the moment. We’re talking about an interim solution to make it about 2 years, until 2016, when Obamacare will undoubtedly be #1 on the eliminate list. If tax returns were staggered, it might buy enough time. In this state it’s also cheap to incorporate new companies….about $50 per, if lawyers aren’t involved, and there’s no particular reason why they should be. Do it yourself incorporation kits are available through Legalzoom.com for $89, and the state normally takes about a month to turn the application around.
So, we’re going to recommend that the client try it. Not much downside, and a lot of savings on the upside.
Your comments are welcome.