can a company exist with no employees?

Question

I own a company that has no employees at the moment. I have paid a few people cash for services in the everyday operation of my company. An example of this is, the person who styled my hair for my video shoot, of the company introduction video, and the individual who staged and helped record said video, were paid fairly for services in cash. I've also paid for other random things, like moving items from place a to b, valuation of collectables, data recording, advice etc. I am trying to establish a new business approach that will eliminate need for employees. The whole premise of this concept is that each situation requires unique attributes and compensation will be distributed fairly by contributions of all involved in producing profit gained.

Answer 1

Of course. A "company" is simply an organization formed to advance certain shared goals. While employing people is one of the things a company might do, plenty of companies have no need to. For example, an investment partnership has no inherent need for employees, only partners/shareholders.

Answer 2

united-states

When is someone an employee?

You should be aware that just because you call someone an independent contractor, that doesn't mean that they aren't actually an employee. The economic and every day nature of the relationship, and not the title assigned to a person who provides services to an entity, resolves the question of whether that person is an employee or not.

Also, there is not just one definition of an employee. There is one rule for federal income tax purposes. Including a special rule for four more or less random kinds of workers for whom there are special statutory rules. There is another similar rule of FICA taxation. There is a different rule on a state by state basis for worker's compensation insurance. There is another that could apply for purposes of particular kinds of liability to third-parties, and yet another that applies for workplace safety laws.

In every legal context where employee status matters there can be different definitions of what constitutes an employee, although in most cases, someone is an employee for purposes of all of the relevant laws.

Also, of course, every jurisdiction has its own laws and is own legal definitions.

Officers

can a company exist with no employees?

A legal entity doesn't have to have employees, but it does have to have some human being who has authority to act on behalf of the entity as an agent of the entity. I will call such people, collectively, "officers".

In a U.S. corporation, the most senior people with authority to do so are usually called "officers" of the company even if those officers are not employees. in a U.S. limited liability company or limited partnership association, the most senior people with authority to do so are usually called "managers" or in cases where the authority to do so is vested in the owners, "managing members". In a partnership, limited partnership, limited liability partnership, or limited liability limited partnership, these people, who are also part owners of the entity are usually called "partners" or "general partners" or "managing partners" (or less commonly "joint venturer"). In sometimes, the term "director" usually applies to a corporate officer rather than to a member of a governing board of a corporation (although this is more common in government and outside the United States). Naming conventions vary in "corporations sole", with the most common practice being to refer to someone by their religious or academic title, as those are the institutions in which this form of organization is most widely used.

Trusts and estates are entities for federal income tax purposes, but are not always considered entities for state law purposes who can consider trustees, personal representatives, and executors to be individuals subject to legal duties that are not separate legal entities. In trusts, including business trusts, the person with authority to act is called a "trustee" or "co-trustee". In probate estates, the person with authority to act is called an "executor" (which is gender neutral in some places and male only in others), "executrix" (which is a female executor in some places), "personal representative", or "administrator". In some places the person or persons responsible for a probate estate are called "successors" who are beneficiaries of the estate with management authority incident to that beneficiary status.

Tax treatment of "officers"

For tax purposes, an owner of a company with management authority in an entity taxed as a partnership under Subchapter K of the Internal Revenue Code in the United States is neither an employee (who receives an annual IRS Form W-2), nor an independent contractors (who receives an annual IRS Form 1099). Instead, such a person is either a "partner" for tax purposes who receives an annual K-1 to the entity's tax return (usually an IRS Form 1065), or a manager of a disregarded entity that is taxed on the owner's Form 1040, Schedule C. Directors of corporations in U.S. federal income tax law are taxed as self-employed independent contractors whose income is reported annually on IRS Form 1099.

In a corporation making an S-election under federal income tax laws, called an S-corporation, an owner is always taxed as an owner on a pass through basis, but can also choose to receive some income wearing an employee hat, if desired. But an S-corporation owner who only receives compensation on account of ownership and loans to the company is not an employee of the S-corp for tax purposes.

Domestic C-corporation owners are only taxed on dividends actually received and share transactions, not merely by virtue of being an owner.

If owners of domestic C-corporations or S-corporations are also officers of the corporation and are not paid separate for that, they aren't taxed as employees unless the IRS decides that dividends paid to the owner (or in kind fringe benefits provided to the owner by the corporation) are disguised payments for work as an employee of the corporation.

Registered agents

Most jurisdictions also require that a legal entity have a "registered agent" who is authorized to receive legal notices on behalf of the entity, usually at a physical address, in addition to some kind of "officer" in the sense that I define it. A registered agent doesn't have to be an employee and indeed, is often an independent contractor of the entity.

What if there are vacancies?

Of course, sometimes there are vacancies in these posts, for example, because an officer or registered agent dies. During the period of the vacancy, there is simply no one with the authority to take the actions that could otherwise be taken only by an "officer" although sub-officer employees, independent contractors, or agents of the company don't loser their authority automatically simply because there are vacancies in all current officer positions in the entity.

When there is a vacancy in the registered agent position, normally default rules of law will provide a way to give notice to the entity, such as giving notice to the jurisdiction's secretary of state or mailing a notice to the entity's last known or official address and/or giving notice by publication in the legal section of an appropriate newspaper.

What do the facts of the question imply?

I have paid a few people cash for services in the everyday operation of my company. An example of this is, the person who styled my hair for my video shoot, of the company introduction video, and the individual who staged and helped record said video, were paid fairly for services in cash. I've also paid for other random things, like moving items from place a to b, valuation of collectables, data recording, advice etc.

This implies that you are acting as an officer of the company whether you use that title or not.

There is nothing new about a company with no employees

I am trying to establish a new business approach that will eliminate need for employees. The whole premise of this concept is that each situation requires unique attributes and compensation will be distributed fairly by contributions of all involved in producing profit gained.

Anyway, this isn't a new business approach.

Indeed, some operating companies outsource essentially everything. These companies used to be called "virtual companies" before that term became firmly associated with firms that have entirely remote workers as opposed to companies that outsource all of their work.

Many entities have no paid employees and no one in a true employment relationship, but still have some officers with authority to act as agents for it. For example, this is typical in entities that simply hold real estate or investment assets.

There is no real special benefit to having only independent contractors and no employees in an entity. It isn't clear what you seek to gain by doing so.

Answer 3

It depends on the jurisdiction and the type of the "company".

california

In the US State of California, there can be many different types of "companies", but they generally fall into 4 classes:

• Corporations
• Partnerships
• Limited Liability Companies
• Sole Proprietorships

For Corporations employees are required. At least one, serving as a CFO. See sec. 312:

A corporation shall have (1) a chairperson of the board, who may be given the title of chair of the board, chairperson of the board, chairperson, or a president or both, (2) a secretary, (3) a chief financial officer, and (4) such other officers with such titles and duties ...

At least one person is required (who can serve in multiple roles). While the board directors are not employees, officers are. See the subsection (b) of the same Sec. 312:

officers shall be chosen by the board and serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment ...

For partnerships, LLCs, or sole proprietorships, employees are not generally required. Partners, LLC members, or proprietors are not considered their own employees.

Answer 4

In the UK, even if your company is a one man company run by you alone, you will make yourself an employee for tax reasons.

You can pay yourself a £12,570 annual salary tax free which reduces your profits and corporation tax. You also pay yourself a minimal amount of National Insurance which means you have health insurance and you get one every year towards your state pension. So you will most likely have at least one employee.