The IRS has guidelines on who is considered an employee. If you set their hours, provide equipment for them to use and there's a few other things I forget, they are a de-facto employee regardless of how you pay them: 1099 or W2. This is why a lot of larger companies will not employ sole-proprietors directly. They require you to either go through a contracting company or set up some corporate structure so that you can't claim to be one of their employees.
It's fairly easy. You just have to follow the guidelines. They are also guidelines not hard and fast rules. If you ask a contractor to come in from 9-5 for a week because that's when you're company is open, but it's a short term engagement, you don't buy them a computer, you don't prevent them from working for other companies, you don't offer insurance or vacation, you don't reimburse them for business expenses, and you have a written contract, you're not likely to run into problems.
>This is why a lot of larger companies will not employ sole-proprietors directly.
There are plenty of large companies that do contract directly. For example, Coke does it all the time.
The IRS has guidelines on who is considered an employee. If you set their hours, provide equipment for them to use and there's a few other things I forget, they are a de-facto employee regardless of how you pay them: 1099 or W2. This is why a lot of larger companies will not employ sole-proprietors directly. They require you to either go through a contracting company or set up some corporate structure so that you can't claim to be one of their employees.