Sunday, February 2, 2020

California Wedding Industry Turned ‘On Top of Its Head’ by Freelancing Law #AB5



Temecula-based destination wedding and event planner Michelle Garibay has run her business for the past 14 years without employees. Garibay has appeared in some of the nation’s most prestigious bridal magazines, including Style Me Pretty, The Knot, and Southern California Bride.

However, Assembly Bill 5 (AB5) has impeded her latest business operations, along with many others in her industry who use independent contractors. AB5 essentially prohibits freelance work, with a few exceptions; it mandates that businesses hire employees instead of paying contractors.

“This industry isn’t well suited to having employees, because the work isn’t steady,” Garibay said. “And the contractors I have working for me have their own businesses as well, and they’re moms with kids—they left full-time employment to be able to have the freedom to work as a contractor.”

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Small business owners in California already pay a lot of tax, and they will have to pay more to cover a portion of their employees’ taxes if they hire their freelancers.

California imposes both business and personal income taxes on small business owners who establish limited liability companies (LLCs), creating a double taxation on pass-through net income and the business itself.

Virtually all businesses in California are subject to at least one of three state income taxes on businesses: a corporate tax, a franchise tax, and an alternative minimum tax. Sometimes, small businesses are subject to all three.


To pay all these taxes, plus the added costs of hiring freelancers as employees, small business owners would have to increase their prices, Garibay said.

“This state is not very small-business friendly,” she said. “This is our main source of income to put food on the table for our families. It’s really cost-prohibitive when the state starts demanding that we now hire these people as employees because it’s going to completely throw this industry on top of its head.”...