Expert: Arthur Naman - 4/4/2011

Question
I reside in Ontario, and I have been self-employed doing sales work for over 10 years. A few months ago I started doing sales and consulting work on a contract basis with a company based in Florida.  Now I was given the option of becoming an employee with a company based in Florida. I would be their only Canadian employee. The complicating factor is that this might be considered as a non arms-length employment, since it is my brother who would be hiring me. What are the EI, CPP, Health Insurance, and other implications? Would it be better for me to continue to work on a contract basis with my brother's company?

Answer
If you are hired as an employee, the company will pay employment taxes such as federal  unemployment taxes, social security taxes, etc. I am not certain what your being a Canadian means with respect to U. S. federal and state employment taxes.

In addition, you may have to file a US income tax returns and pay taxes accordingly.

As to the question of you being related to your brother, that is not a significant issue as far as I can see. Relatives of owners are often hired by small business owners.

Unless there is a reason for you to be an employee that I cannot think of I would suggest continuing as an independent contractors.

As this forum is intended for bookeeping and accounting questions, there may likely be aspects I have not thought of. There is an income tax forum on AlllExperts or you may choose to seek assistance of a tax professional in the US or Canada.