using a written agreement, you can head off serious disagreements,
define expectations for both sides and clarify the terms of the
relationship and financial obligations. And, should the case ever come
to court - after all, even written contracts are subject to dispute -
you will have the proof in hand needed to support your position.
Remember that legal waters can be treacherous if left to navigate them
alone. When in doubt, contact an attorney to review your contracts and
ensure that your liabilities are covered.
an added bonus, a written contract can help establish that you are, in
fact, an independent contractor rather than an employee. This can
protect you from a challenge by the IRS that you are trying to evade
contractors should, first and foremost, have a legitimate registered
business name and an established business type (LLC, partnership,
corporation, etc.) with checks being made payable to that business name
or corporation. The contractor should be solely responsible for his/her
own taxes, both self-employment and income tax as well as workers
compensation insurance in the event that s/he is injured on the job.
before you hire a freelancer or offer yourself as an independent
contractor, sit and carefully review the following areas so both parties
are in agreement before work begins.
the IRS list of factors used to determine whether a worker is an
employee or independent contractor (www.IRA.gov/smallbiz).
a simple agreement specifying the independent contractor relationship.
This won't be enough by itself, but it is a great start. Sample
agreements are available online at Business Owner's Toolkit
(toolkit.cch.com), LawDepot.com and Nolo.com.
you are the client, ask the independent contractor to complete a
questionnaire and prove that they operate their own independent
business. Helpful information includes their registered business name,
business bank account, Employer Identification Number (EIN) or Social
Security number if they are a sole proprietorship, and how the business
is structured (LLC, corporation, etc.). Also
verify how the work will be performed, what installments and payments
will be due, and if there are any cancellation clauses should one or
both parties leave the relationship before the contract is completed.
For more advice on utilizing independent contractors in your business, contact your accountant.
Steven A. Feinberg, CPA - www.AppletreeBusiness.com