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Business Law
Re: Career Institute of America, Inc.
Summary of Facts: Client, Career Institute of America (hereinafter "CIA"), is an organized, non-profit organization specializing in Internet-based career training, primarily in the automotive field. Most of their employees are instructions who are hired as independent contractors. CIA did receive a one-time Federal Grant in the previous year.
Whether CIA should remain a non-profit corporation and, if not, what they should become and, 2) What requirements must CIA's independent contractor agreements meet.
As a Delaware incorporated business, the Code of Delaware governs CIA's activities.
CIA should incorporate as a for-profit corporation. Since they get their funding primarily, if not exclusively, from tuition costs and there is no apparent benefit to the main principal, namely the founder, to not make a profit, incorporating makes the most sense. When incorporating, CIA should incorporate as a S Corporation. The benefit of this is that CIA and its directors will maintain the liability protections given by being a corporation but not be liable to the double taxation that C corporations face. Further, CIA should incorporate as a closely held corporation. Although they will still have to create officers, have annual meetings, and issue shares, this can all be done privately. In other words, the founder will be able to maintain his close involvement by being the sole shareholder and performing all the officer roles.
In order to ensure that the instructors are hired as independent contractors, CIA should take the following steps:
Have every instructor sign a contract clearly labeled "Independent Contractor."
Have all instructors turn in a W9 form, the standard federal tax form for independent contractors.
In the contract, clearly lay out that each instructor is not an employee, will not receive any employee benefits, that the agreement may be terminated at any time and have it signed as "Independent Contractor."
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