Tax implications and other challenges for a job in the US with an overseas business
October 14, 2011 12:33 PM   Subscribe

What issues am I not considering about this potential job working in the US for a friend's overseas business?

I am based in the US. I have a friend overseas who is an entrepreneur with a plan for expanding his small business that involves having a US-based assistant to ship his product. He approached me about my interest and said that the job would involve receiving the (relatively small and lightweight) components of the product from a US manufacturer, compiling them and mailing them out. I would be responsible for placing orders for the components as supplies dwindle, but supplies would be paid for by the business. I would be paid a flat rate per piece plus a small percentage of overall sales through PayPal.

There's always a chance that predictions are wrong, but based on an assessment of his business done by a consultant, my friend said that he believes that at the low end of potential output, I would make about $100-$200 per week for about an hour of work per day (so roughly $14-28 per hour). If this initiative takes off, down the line I could be in a position to quit my current job, which I have been wanting to do.

I am not concerned about the integrity of the offer. My friend has been running his own business for about 10 years, and has faced plenty of challenges, but has a good product that he's invested in and has kept his business going. And he's the kind of friend who is practically family, and I'm close to his extended family, so he has incentives (beyond wanting his business to succeed and his own strong sense of fair play) to treat me well. Based on our discussion, I think he has thought things through thoroughly.

The concerns that jumped to the top of my mind were:
  1. Time - my schedule is snug as it is, but I think I can find an hour a day at this point (beyond that may be challenging)
  2. Storage - I don't have much of it at home, but my friend asked me to look into storage units as well
  3. Taxes - I'm not sure where to begin trying to figure out how I should file and what I should set aside to cover taxes. I'm inclined to do this on my own since I'm expecting it to be a small stream, but if I should seek help, who should I go to (DC-area specific recommendations welcome)?
I'm talking to my friend again early next week and he wants to be able to move on this quickly. What issues am I not thinking about? What questions do I need to be asking? I plan to ask for a contract - what do I need to make sure is in it?

  1. What issues or challenges would arise from being effectively an independent contractor for a small business on the other side of the world?
  2. What needs to be in a contract for this business relationship?
  3. How do I figure out filing and setting aside sufficient money for US taxes on income from a foreign source?
posted by Hark! A Sock Puppet to Work & Money (5 answers total) 1 user marked this as a favorite
Are the components subject to trade restrictions on either side or tarrifs/duty on the other side? Who is going to pay the tarrifs? You are the one legally responsible for making sure that the components are not subject to trade restrictions by the US government and it will be your hide tanned if you are found to have violated such restrictions.
posted by The 10th Regiment of Foot at 12:41 PM on October 14, 2011

You should never go in to business with a friend that you wouldn't be OK with losing if things go pear-shaped.
posted by Aizkolari at 12:56 PM on October 14, 2011

I have no insights about the legal issues, but my first thought was about the time issues: You say right now, you expect it to be an hour a day. In the future, you hope business will pick up to the point where you can quit your job. What about in between? What about when it's 3 hours a day, so you don't have time in your schedule but you're not making enough money to quit your job? What if the time estimate is wrong and right away it's 90 minutes a day, but not much more money? This would be my biggest concern.
posted by brainmouse at 12:56 PM on October 14, 2011

I'm with Aizkolari. My biggest fear with going into business with someone so close is if one of us did not live up to the expectations of the other.

I would really want to lay out the expectations, and truly treat it as business, and not an extension of a personal relationship.
posted by zombieApoc at 1:19 PM on October 14, 2011

Thanks for the thoughts so far. Tariffs hadn't occurred to me, so that's definitely something good to look into.

Workload had occurred to me, and I have underemployed friends that I think would be interested in earning extra cash, but yes, that is a concern.

And I am concerned about clarifying expectations and having a business relationship distinct from the personal relationship, which is why I'm going to have a contract, and could use some help thinking through if there are things that need to be in it beyond pay rate details and turnaround deadlines.
posted by Hark! A Sock Puppet at 8:50 AM on October 15, 2011

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