How do you handle payments to contractors if you are not yet incorporated as a legal entity?
I am launching a social enterprise, and will be fiscally sponsored under a 501 (c) 3 parent organizations, but I am not yet. I have a program starting and am contracting out a teacher to help run it. I am unclear how to handle paying this person if I am not yet incorporated.
Eway or PayPal. We used PayPal for years and still do but now have started using eway. Either has worked well.
Pamela: Rory Collins' suggestion is a good one. Prior to establishing a for profit corporation (I don't know enough to comment on a not-for-profit entity), I handled things more simply. I wrote all checks out of my personal bank account, paid what I needed to, and then upon incorporating, I setup the corporate bank account, itemized all the business expenses I had paid up to that date, signed and dated an expense reimbursement form for the corporation, and had the initial board of directors vote to reimburse me as the Incorporator for all business expenses paid by me leading up to that date. The vote of approval was recorded in the Minutes of the corporation. Following the BOD meeting, the corporate treasurer reimbursed me and took over the responsibility of filing the 1099 with the contractor, having absorbed the debt/liability from me. They recorded all itemized expenses according to the chart of accounts setup in Quickbooks by the corporate accountant.
Set up a bank account or paypal business account as a sole proprietor. Pay your contractor out of this account so you have record and provide them with a 1099 at the end of the year.
If you have not yet incorporated, this would be a completely separate transaction from when you do acquire AOI & an EIN from the IRS.
Pay your independent contractor in whatever terms you agree upon. Once you have your sponsorship, the payment options would change.