Independent Contractor Agreements are an effective way to clearly detail the scope of a project and services rendered, payment schedules and deadline expectations of both parties in a freelance arrangement. These types of agreements are legally binding and they serve the important purpose of specifying the details of a service so that both sides are shown to be aware of the agreement. This allows for both sides to be held accountable for their actions and their respective responsibilities. Independent Contractor Agreements are also sometimes referred to as Freelancer Contractor Agreements, Contract Labor Forms, or Independent Contractor Contracts, but they all amount to the same thing from a legal perspective.
You’ll want to utilize an Independent Contractor Agreement if:
- You are a freelance or independent contractor and you need to provide a contract for your client
- You are working with a freelance contractor and you need your agreements to be clearly outlined in a contract.
What’s Different About an Independent Contractor Agreement?
By far, the most significant and noteworthy distinguishing factor about these types of contracts and agreements is that they are NOT for employees. It is instead specifically for drafting up an agreement between you–or your company–and an independent or freelance worker. An example of this would be paying a handyman to fix some stuff in the office, or hiring a freelance IT person to optimize your website or office space, or even taking on a consultant to get another expert opinion or counsel on a business move that you are considering.
Importantly, all of these examples are regarding independent workers and because they are not your employees, the freelancers themselves are responsible for their taxes. However, since they are not your employees, you cannot have as much control over their actions. For instance, you can’t stop them from taking on other clients while they are working with you, nor can you dictate their day-to-day schedules or tell them how to do their job. In other words, they have far more freedom than your employees because they don’t express work for you, rather they work with you on a specific issue or situation.
Why You Really Should Have an Independent Contractor Agreement
The first and most obvious reason is that the agreement will help to protect your business and financial interests while you are doing work with a freelancer. The contract will detail exactly what work needs to get done, when it has to be completed by, and how much you are going to pay for that work. Another reason is that protects you from liability issues and helps to shield your personal assets. Also, should you ever go to court, you will have the signed agreement to easily show the judge what your expectations were for the service.
On the other hand, if you are the freelancer, having the agreement can help you get paid properly should you end up in a disagreement with the client over the payment. You also appear far more professional by providing a contract for your clients to review and sign. Lastly, the agreement demonstrates your willingness and commitment to work and get your job done with high quality, which can be very reassuring to the client.
As we alluded to, there are several key advantages to hiring an independent contractor, such as:
- Not having to pay their tax obligations
- Not having to offer health insurance or other related benefits
- Only needing to pay them for previously agreed upon work
- The ease of ending a contract compared to firing an employee
- Less paperwork and documentation overall
- Not having to micromanage their work
Do I Have Any Other Obligation if I Hire a Freelancer?
Here’s the thing. If the person you have contracted to work for you is entirely self-employed, then you will need to make sure that they complete a W-9 Form and you will need to fill out a 1099-MISC form, both of which can be electronically downloaded from the IRS website. You’ll want the W-9 form to gather your freelancer’s contact information and tax ID number, while the 1099 form is how they will report income their unique tax return. You are required to do this if you pay them more than $600 in a fiscal year. Your deadline is to submit those documents to the IRS and the contract worker by January 31st on the following year from when you hired them.
Bear in mind that the burden of proof is on you since the IRS typically assumes that someone is an employee, unless shown proof otherwise. Therefore, it is wise to keep all of those records and documentation in the event that the IRS asks for further proof that the contracted worker was not an employee of yours. This is for your own benefit as it results in your own protection from any audits or inquires from the IRS.
Freelance Independant Contract Agreements
Freelance workers are becoming increasingly commonplace and the future for most small business is one in which preference will probably be given to simply take on independent contractors and freelancers instead of a full team of employees. More and more small businesses are going along with this model of having only a few core employees and many other freelance workers for their business. This is a lucrative model, especially for smaller businesses, because it is far more cost efficient and flexible. Therefore, it is in your best interest to look and see what kinds of reviews your freelancer worker has prior to signing into an agreement with them; having an idea of what previous companies have said regarding their work ethic is like having references during an interview with an employee–it can definitely help you to make the right decision as to who to hire for the job. Furthermore, by building positive and friendly relations with freelancers, you are setting yourself up for many good working relations for years to come, especially since those workers may also have other freelancer friends that they can refer you to if you ever need some extra work done in a pinch.
California Contracts Lawyer: Where We Come Into the Picture
At KAASS LAW, our Glendale business lawyers are all about building long-lasting and meaningful relations with our clients and their associates. We believe in the ever-changing and evolving models of the future of business and we are here to make sure our clients have the smoothest experiences going forward with their brands and ideas. Whether you are a business looking to hire some freelancers and independent contractors, or whether you are a freelance worker who is self-employed, we are here to guide you along your financial journey. We have years of experience with connecting the right people for the job, and always stand by our clients. If you are thinking of drafting up an Independent Contractor Agreement, we definitely do not want you to go through that process alone. Contract law is a very complex area of law and we can greatly simplify your business by helping you with your goals. We work with small businesses and freelancers alike to ensure that effective contracts and agreements are written and agreed upon. We invite you to give us a toll free call at 310-933-5171 to speak to our experienced contract lawyers today and to see just how much we can help your business out. So that way, you can keep doing more of what you love: stress-free.
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KAASS LAW is authorized to practice law in California. The above content is intended for California residents only. This content provides only general information which may or may not reflect current legal developments. KAASS LAW expressly disclaims all liability in respect to actions taken or not taken based on any of the contents of this website. The above content DOES NOT create an attorney-client relationship. KAASS LAW does not represent you unless you have expressly retained KAASS LAW in person at the KAASS LAW office.
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