Next year however I'd like to start paying myself as well as hire a few people on a contractor basis.
what form is the business? if a sole proprietorship, or single member LLC not electing to be tax as a Corporation, you don't take a salary. you'll file schedule C. all the income and expenses of the business are reported there so any money you take out (salary) is not taxed again . you should probably have a business checking account and if needed credit card account. separate accounts makes it easier to separate personal from business expenses. it's also better should you ever be audited. make sure to keep support for expenditures for 6 years.
you talk about independent contractors exceptions to issuing 1099-misc if amount paid $600 or more
Exceptions. Some payments do not have to be reported on
Form 1099-MISC, although they may be taxable to the
recipient. Payments for which a Form 1099-MISC is not
required include all of the following.
• Generally, payments to a corporation (including a limited
liability company (LLC) that is treated as a C or S
corporation). However, see Reportable payments to
corporations, later.
• Payments for merchandise, telegrams, telephone, freight,
storage, and similar items.
• Payments of rent to real estate agents or property
managers. However, the real estate agent or property
manager must use Form 1099-MISC to report the rent paid
over to the property owner.
make sure to get a tax ID number from them before they start to work. afterwards they may refuse and that could subject you to penalties when filing 1099's without id #'s use form w-9
see this link for help in determining IC vs employee
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
should you misclassify an employee as an independent contractor, if audited or the "employee" complains to the IRS that taxes should have been withheld, besides having to pay the payroll taxes you should have withheld, there are 100% penalty for failure to withhold and pay in certain taxes. The IRS doesn't go after the "employee" for the taxes not withheld and whether you can is a question. It is common when the IRS conducts an audit to ask for employee and independent contractor records.
besides taxes most states require that employees be covered bu workmen's compensation insurance and there can be substantial penalties for failure to cover them
as a corporation you are an employee. Failure to take a salary, especially if profitable, can result in the IRS imputing one and then hitting you for taxes, penalties and interest. again 100% penalties may apply to the failure to remit certain of these taxes.
this does mean you don't need to take a salary when unprofitable, there really are no hard and fast rules, but the longer you go without one, the greater the risks the iRS might inquire.
there are other things like good record keeping, I suggest you consult with a tax pro for the first year.
