Tutoring Business Payroll Management
"This is going to depend on the tax jurisdiction and I have no knowledge of the rules in Illinois.  But I'd like to give you some direction about how to think about this.   The biggest problem that you might hit is that if you collect a single check and then distribute to the tutors, you may be considered their employer.  As an employer, you would be responsible for things like  This is not meant as an exhaustive list.   Even if not an employer, you are still paying them.  You would be responsible for issuing 1099 forms to anyone who goes above $600 for the year (source).   You would need to file for a taxpayer identification number for your organization, as it is acting as a business.  You need to give this number to the school so that they can issue the correct form to you.  You might have to register a ""Doing Business As"" name.  It's conceivable that you could get away with having the school write the check to you as an individual.  But if you do that, it will show up as income on your taxes and you will have to deduct payments to the other tutors.   If the organization already has a separate tax identity, then you could use that.  Note that the organization will be responsible for paying income tax.  It should be able to deduct payments to the tutors as well as marketing expenses, etc.   If the school will go for it, consider structuring things with a payment to your organization for your organization duties.  Then you tell the school how much to pay each tutor.  You would be responsible for giving the school the necessary information, like name, address, Social Security number, and cost (or possibly hours worked)."
Draw up a budget and see where most of you expenses go to. See if you can cut any not essential expenses.  If this doesn't help much you will need to increase your income. Ways to do this without going into debt may be to get a job, ask your parents for money, sell some of your non essential things, tutor fellow students or students in earlier years, just to name a few. Basically, if you want to stay out of debt you income needs to be higher than your expenses. So you either need to reduce your expenses, increase your income, or both. Without further information from yourself it would be quite hard to direct you in the right direction. "Payroll is a huge part of these companies' costs. The notion that payroll could be doubled or tripled and prices would only rise ""a few cents"" is wild hyperbole fit for /r/politics, not /r/business. We expect better than Alternet here.  But regardless, it's not about damage to the consumer via higher prices. In my  opinion, the fact that something costs the consumer more is almost totally irrelevant to this discussion.   The point is that businesses that operate by employing teens and college students are under no obligation to raise their wages just because the broader economy is crap and adults are filtering into the positions." Of course not. But you walked into this with your eyes open, did you not? Did you think it was going to be 20 min a week or did you know what you were agreeing to?  You are asking to jump your price 300% a day into the work. Your friends are in a tight spot already, there is a time crunch until these tests, and her passing or not has real consequences for her. If it were me it would seem clear you lowballed me to get me to say yes then are leveraging that to a massive price hike assuming I won't want to change tutors once you've started. If we were friends we wouldn't be after this.  Honestly I think your best option is to go to them and apologize. Say you did not understand the commitment you were making and you do not think you are the right person to tutor their daughter. Offer to continue working with her until they find a proper tutor. If they offer more money maybe you can discuss it but don't you bring it up. They may. I'm not sure about in Europe but in the USA even $10/hr is way below average for a private tutor. That's more like prices for a group test prep course. You definitely lowballed yourself on price and the rate you are thinking is probably a reasonable if not discounted one still. If this weren't involving friends you could be more firm on needing to push up the price because if they walk away angry it's just a lost customer. But doing business with friends is always messier.  I could be wrong here, but are you maybe closer to the daughter's age? Are these family friends more accurately your parent's friends? If I'm off on that my advise above stands. If I'm right, think about how your actions will affect the friendship between your parents and this family. Might want to talk with them about it first. The software he is talking about readjusts your portfolio weights back to your original allocation on a semi-constant basis. Basically it's designed to replace the stereotypical, lazy financial advisor.  Your second point is quite valid though... One such example for anyone reading who has a young child is a coverdell ESA which allows you to put pretax income into an investment fund and withdraw tax free to spend on anything education related including the primary and secondary level (ie books, Supplies, field trips, tutoring, etc.). Basically money youd probably spend anyway, but this way you skip out on some taxes. "There are way too many details missing to be able to give you an accurate answer, and it would be too localized in terms of time & location anyway -- the rules change every year, and your local taxes make the answer useless to other people. Instead, here's how to figure out the answer for yourself. Use a tax estimate calculator to get a ballpark figure. (And keep in mind that these only provide estimates, because there are still a lot of variables that are only considered when you're actually filling out your real tax return.) There are a number of calculators if you search for something like ""tax estimator calculator"", some are more sophisticated than others. (Fair warning: I used several of these and they told me a range of $2k - $25k worth of taxes owed for a situation like yours.) Here's an estimator from TurboTax -- it's handy because it lets you enter business income. When I plug in $140K ($70 * 40 hours * 50 weeks) for business income in 2010, married filing jointly, no spouse income, and 4 dependents, I get $30K owed in federal taxes. (That doesn't include local taxes, any itemized deductions you might be eligible for, IRA deductions, etc. You may also be able to claim some expenses as business deductions that will reduce your taxable business income.) So you'd net $110K after taxes, or about $55/hour ($110k / 50 / 40). Of course, you could get an answer from the calculator, and Congress could change the rules midway through the year -- you might come out better or worse, depending on the nature of the rule changes... that's why I stress that it's an estimate. If you take the job, don't forget to make estimated tax payments! Edit: (some additional info) If you plan on doing this on an ongoing basis (i.e. you are going into business as a contractor for this line of work), there are some tax shelters that you can take advantage of. Most of these won't be worth doing if you are only going to be doing contract work for a short period of time (1-2 years). These may or may not all be applicable to you. And do your research into these areas before diving in, I'm just scratching the surface in the notes below." There is a moral and legal obligation to file the earnings. Not doing so is tax fraud. You should keep a ledger or some record of your earnings, helpful guidelines here. Records are required by the CRA: According to the law, your responsibilities include: (source) You could get in trouble if one of your pupils report the expense at their tax filing, and the CRA finds no matching statement on your filing report. Tutoring are eligible for tax credit in case of disability: Tutoring services that are supplementary to the primary education of a person with a learning disability or an impairment in mental functions, and paid to a person in the business of providing these services to individuals who are not related to the person. A medical practitioner must certify in writing that these services are necessary. So if one of your pupils fall under that provision, you will get tax trouble sooner or later. Bottom line: start making records now, and report your earnings. Collect your tax as any lawful citizen is required to. "We will bill our clients periodically and will get paid monthly. Who are ""we""? If you're not employed - you're not the one doing the work or billing the client. Would IRS care about this or this should be something written in the   policy of our company. For example: ""Every two months profits get   divided 50/50"" They won't. S-Corp is a pass-through entity. We plan to use Schedule K when filing taxes for 2015. I've never filled a schedule K before, will the profit distributions be reflected on this form? Yes, that is what it is for. We might need extra help in 2015, so we plan to hire an additional   employee (who will not be a shareholder). Will our tax liability go   down by doing this? Down in what sense? Payroll is deductible, if that's what you mean.  Are there certain other things that should be kept in mind to reduce the tax liability? Yes. Getting a proper tax adviser (EA/CPA licensed in your State) to explain to you what S-Corp is, how it works, how payroll works, how owner-shareholder is taxed etc etc." "In the US, you'd run the risk of being accused of fraud if this weren't set up properly.  It would only be proper if your wife could show that she were involved, acting as your agent, bookkeeper, etc. Even so, to suggest that your time is billed at one rate but you are only paid a tiny fraction of that is still a high risk alert.  I believe the expression ""if it quacks like a duck..."" is pretty universal. If not, I'll edit in a clarification.  note -I know OP is in UK, but I imagine tax collection is pretty similar in this regard."