I’m hiring or have hired 1099s (Independent Contractors)
If you are considering bringing on your future worker as an independent contractor, or if you have an independent contractor already, we recommend that you check out our article describing the legal requirements for independent contractors and employees (here). We always recommend reviewing that distinction first, because it’s very difficult to classify a worker as an independent contractor, and there are penalties for misclassifying workers as independent contractors.
If you decide you would like to bring your new worker on as an independent contractor, we have some tips for you:
- Think about the relationship as a relationship between a business (the independent contractor) and a client (you). This can help you think about what requirements and concerns you have and how to manage those, while also highlighting the level of freedom the contractor will have as their own business. If you are getting stuck here, that’s very common – there’s a lot to consider. We can help with this as part of step 2.
- We strongly recommend a contract to lay out the relationship described above. Having a well-drafted agreement is essential to ensure you have a strong basis to prove you meet the required minimum thresholds in case you are audited by the IRS or another government agencies. It can also address other important issues, such as:
- Payment terms: This includes when the independent contractor gets paid, but also:
- Whether the contractor has to send an invoice first (and if so, what does it have to include?)
- What happens if the work doesn’t meet the requirements?
- When/how does the independent contractor get reimbursed for expenses?
- Intellectual Property: At the end of the day, who owns what? This is especially important for consultants, computer programmers, and other contractors that might help you develop materials that you want to reuse or give to clients.
- Confidentiality: Is there information you want to protect? The independent contractor does not have to keep anything confidential without a confidentiality agreement.
- Provisions regarding the independence of the worker: Does the independent contractor need any specific insurance and/or worker’s compensation?
- Termination: If the relationship does not work, how can you get out of it? What happens upon termination? What fee should be paid? Does the independent contractor still have any confidentiality obligations, or any other obligations?
The processes, risks, and liabilities are different for each business, so this list may not all be relevant to you and there may be other terms that are. We always start with a questionnaire and/or a call to discuss your business with you and help prioritize your biggest concerns or risks for your business to make sure those are addressed where possible.
- Independent Contractor Agreement Template: $3,450