Thoughts on Contractor vs W-2 Mix in Regulated B2B Services?

searcher profile

September 07, 2025

by a searcher from Northwestern University in Salt Lake City, UT, USA

I’m looking at a teaser for a B2B services business in a regulated industry. On the surface it looks interesting, but it seems like most of the staff are contractors vs W-2s. I’m still trying to confirm the mix with the seller, but before I go further I wanted to ask: for those who’ve been in contractor-heavy businesses, what are the real risks or guardrails you keep in mind? My worry is getting into a situation where too much of the value walks out the door if the contractors leave. At the same time, I don’t want to dismiss a good business just because of the structure. Curious how others here have thought about or managed this trade-off.
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Reply by an investor
from New York University in New York, NY, USA
Asim, a consideration is what industry is this B2B company in? There might be additional considerations depending on the industry, especially if it is regulated. Then I would look into it to see "how 1099" they really are. Good place to start Happy to provide any further insight
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Reply by a searcher
from Princeton University in Livingston, NJ 07039, USA
Just because someone is a W2 doesn't mean they cannot walk out the door. The only thing that would tie employees are items like health insurance, 401K, ESOP, etc. If anything you are probably saving alot of money and headaches using contractors.
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