An independent contractor agreement is between a client and a company that makes a promise to produce services in exchange for payment. The client will have no responsibility for employees, subcontractors, or personnel in connection with the services provided. Their only obligation will be to pay the independent contractor with no liability if anyone should get injured during the performance of the work.
Table of Contents
- Independent Contractor Agreements: By State
- Independent Contractor Agreements: By Type
- What is an Independent Contractor?
- How to Become an Independent Contractor
- How to Write an Independent Contractor Agreement
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
1-Page Independent Contractor Agreement – Simple form that is used for easy and straightforward agreements.
Babysitter Contract – To hire a person that watches other people’s children for payment.
Bookkeeping Services Agreement – For an individual or licensed accountant that organizes the revenue, profit, expenses, and income of a business or individual.
Caregiver Agreement – To hire someone to take care of a family member or friend. Can be for a live-in or remote caregiver.
Consulting Services Agreement – To hire an individual or company for the guidance and direction in an area of expertise.
Massage Therapist Independent Contractor Agreement – Between a massage therapist and their company to detail the amount of renting a room, client share (%), and any other terms.
Nanny Contract – For an individual that will stay with a child for an ongoing basis.
Real Estate Independent Contractor Agreement – Made between a real estate agent and their company. The contract will detail commission splits, fees to be paid by the agent, and any other terms to be agreed upon.
Salesperson (Commission) Agreement – If a party is to be paid based on a percentage of their sales, also known as a “commission”.
Salon Independent Contractor Agreement – Made between a hairstylist and the owner of a salon.
Tattoo Independent Contractor Agreement – Between the tattoo artist and their employer.
Truck Driver Independent Contractor Agreement – Between a truck driver and the client paying for the transport.
An independent contractor is
In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is an independent contractor.
Source: Section 31.3121(d)-1)(c)(2)
- IRS Form W-9 – Must be completed by an independent contractor before any services are provided or an agreement is made. This form is not filed with the IRS but is required to be held by the payer of services for at least four (4) years.
- IRS Form 1099 – To be filed with the IRS at the end of the year if the payer paid an independent contractor $600 or more. Must be filed by January 31st following the calendar year.
Becoming an independent contractor allows a person to be self-employed and start their own business. An individual may work as a sole proprietor by using their personal name to conduct business activity. Although, for tax reasons, it is highly recommended for an independent contractor to incorporate.
Lookup a business name you wish to incorporate by entering in your Secretary of State Database. After entering the selected name, if there are no results then usually the name is available. To confirm a name is available, an individual may file a Name Reservation Request and reserve the name from 30 to 120 days.
Use the USPTO in order to conduct a trademark search of your business name. For example, if you happen to choose the name ‘Frank’s Hot Sauce’ it could be a trademarked name. If there is no trademark for the business use then the incorporation can proceed.
Select the type of entity that best fits your needs. Due to every individual having their own financial needs it’s recommended to meet with an accountant before ultimately deciding which entity is best.
- LLC – The owners, known as “members”, own as a percentage (%) of the company, not shares. An LLC can choose to be taxed either as an S-Corp or C-Corp.
- C-Corp – Business is taxed at the corporate level of *21% (*Public Law No: 115-97)
- S-Corp – All profits pass-through to the owners and taxed at their personal income rate.
- Partnership – Creditors may go after the partners on a personal basis. Meaning if the partnership owes debts a partner’s personal vehicle and home are subject to seizure.
- Sole Proprietorship – Going into business under your personal name.
If an LLC, Corporation, or Partnership was created there will be additional documentation in the form of the following to detail ownership, individual roles, and any other rules for the business:
- Corporation – Corporate bylaws are required to state when annual meetings are to occur along with other administrative items.
- Download: Adobe PDF
- LLC – An operating agreement is needed to outline the day-to-day functions of the company and ownership percentage.
- Partnership – A partnership agreement states the ownership percentage, roles of each partner, partnership purpose and how it will operate on a day-to-day basis.
- Download: Adobe PDF
Every individual and business in the United States are required to either have a Social Security Number (SSN) or an Employment Identification Number (EIN) to conduct financial transactions. Unlike an SSN that an individual gets upon birth or citizenship, an EIN can be obtained by using the IRS Website.
The process is free and takes about 10-15 minutes by answering a series of questions.
How Does an Independent Contractor Pay Taxes?
An independent contractor pays taxes by
Step 1 –