Partner Comp, ASG and Other Animals

[PensionPro]

Attorneys A and B are 50/50 partners in a law firm. Attorney C is a "junior partner," who gets a 1099, which he reports on his individual Schedule C.

Is Attorney C an independent contractor (and not an employee) of the law firm? Or is the sole proprietorship likely to be considered an affiliated service group with the law firm?

Thanks for any insights!

[PensionPro]

Final boarding call ... any opinions out there? Thanks.

[Guest Sieve]

Just made it through security in time. Whew!!

Whether Attorney C is, in fact, an independent contractor or an employee is dependent on facts, such as whose equipment does he/she use, is he/she providing services to anyone else, is he/she under the supervision of one of the other attorneys, is he/she required to clear vacations and free time with others, or report to the office at certain times/days, etc., etc. It is very fact dependent. Calling him/her a "junior partner" doesn't help the independent contractor argument, either.

Remember that the circular argument fails: he/she's an independent because he/she is not eligible for the retirement plan, and he/she is not eligible for the retirement plan because he/she is an independent contractor. You'd be surprised how many use this argument, not in the slightest aware of its folly!

If Attorney C is an independent contractor, then ASG status will depend on the amount of services provided to the law firm in relation to the amount of services provided to others, or the amount of services both provide to the same clients.

The devil clearly is in the details.

[K2retire]

The term "junior partner" implies that he might have some ownership in the partnership, although the percentages stated seem to contradict that. The answer to that question can also impact the answer.

[PensionPro]

After careful review, the details of the particular situation point towards an ASG. The law firm calls him a "junior partner." Most likely the clients of the law firm see Attorney C as one of the attorneys of the firm, and not as as an outside consultant or of counsel. Attorney C's only income on his individual Form 1040 is the 1099 income from the law firm. He seems to be [sort of like] a non-equity partner, but instead of paying him on K-1, they are issuing a 1099.

Thank you for the extremely helpful responses. I am still open-minded to any other perspectives on the subject.