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Question :
Kia ora. Would love some advice on how to structure my payment system to contractors. My business is all online. A portion of my business will be bringing in facilitators who I’ll be hiring to do the work. The work is created by the facilitator but ownership belongs to the business. Rather than giving them an hourly rate, I want to share the profits of the product they create for my business (75-25 %roughly) so they only get 75% of profit at the end of every month.My question is, what’s the best way to structurethis in terms of payments, taxes, accountability to IRD  etc. also I’m very new to business. Is there anything I  should be thinking about when paying people thank you 

Question submitted 27/10/20 @ 06:07am
Industry: Funding & Finance
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    Hi there,

    There are obviously quite a number of ways to tackle this, but I would suggest that in you system you need be able to identify the monthly sales created by the facilitator (for example, set the product up as a inventory item so they are going to sell the inventory and at the end of the month they can run a sales report by inventory), so you can work out how much to share with that contractor.

    In this case you are in a better position than a seller to determine the price of goods or services. The business will then issue the tax invoice rather than the seller, through “buyer-created tax invoice”.

    Buyer-created tax invoices are most commonly used in New Zealand’s primary industries such as farming, fishing and wine-growing.

    You can refer to the below link for more info:
    https://www.ird.govt.nz/gst/tax-invoices-for-gst/buyer-created-tax-invoices

    Hope this helps.
    Cheers
    Nelson

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    Kia ora. Monthly contract payments to each of the facilitators seems like it would be a practical way to deal with the arrangements you describe. Among many other matters, I’d suggest very clear terms need to be agreed, and documented, on how each facilitator’s profit will be calculated, what percentage they will be entitled to and how often they will be paid. On the basis that you will maintain records of the profit derived from the work of each contractor, you could advise them of this and then get them to issue you the appropriate invoice (based on their profit percentage) in order to get paid. If they are GST registered, they would add GST to the amount invoiced. If they are GST registered you could also discuss the process of issuing buyer-created invoices as already noted. I note your comment that ‘The work is created by the facilitator but ownership belongs to the business’. It would be as well to make sure the facilitators are clear about this up front in your negotiations / agreements with them. All the best.

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