An independent contractor agreement allows you to write a contract between you and someone else. The template provides standard clauses many parties choose to include in contracts between a business and a freelance worker. You can fill in the information that applies to your situation and make changes where necessary. Use of this independent contractor template does not constitute legal advice. For questions about the legal implications about parts of the form, contact a licensed attorney.
Independent Contractor Agreement
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An independent contractor agreement is a legally binding agreement between an independent contractor and another company or individual. Both parties should use an independent contractor agreement to fill out their tax forms accordingly. Fill out this legal document sample, download it, and sign it to make your life much easier without huge expenses.
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Template Description
What Is an Independent Contractor Agreement?
An independent contractor agreement is a contract between two or more parties to create a freelance work arrangement. The document defines the relationship between the parties and lays out key provisions, such as the price, scope of work, project deadline, payment method, and anything else the parties deem essential.
The independent contractor agreement helps ensure everyone is on the same page. Many business disputes arise simply because the parties misunderstood the unspoken terms of the arrangement. You can help limit the potential for controversy by staying one step ahead of the game and using a written agreement.
Insight
An independent contractor can even be a business owner who provides freelance services to the public, such as a lawyer consulting, nurse consulting, makeup artist, designer, spa massage therapist, mental health therapist, truck driver, personal trainer, dentist, veterinarian, real estate specialist, or other occupations.
Parties of the Independent Contractor Agreement
- Independent contractor –– A self-employed individual or business entity that provides a specialized service to another entity or individual. The contractor works according to the terms of an independent contractor agreement and is not classified as an employee. The IRS has a page of what qualifies as an independent contractor.
- Client or employer –– the party that commissions the services of a contractor and is responsible for providing the information necessary for them to do their job. The employer is also responsible for paying the worker according to the terms of the contract.
Key Terms
A simple contractor agreement form outlines the responsibilities of both the worker and the employer toward fulfilling the work obligation. It ensures both parties are on the same page. Some general terms to include in the contract are:
- Intellectual property (IP) –– A legal term used to describe tangible outputs resulting from creative efforts. Specify who will own the underlying rights to the work produced.
- Compensation details –– Indicate the rates the client will pay for the service or product. Other compensation details include the billing date, retainer arrangements, payment schedule, or penalties for late payment.
Insight
Independent contractors usually charge more than employees make if you don’t include benefits. However, where there is competition, the freelancer can lower their rates but not at the risk of losing too much income that can pay for their billing management.
- Confidentiality –– A standard independent contractor agreement should provide confidentiality guidelines, should the contractor have access to the client’s trade secrets or sensitive business information. The clause specifies that the contractor cannot share, download or trade the confidential information they come across throughout their work. This clause is also a separate document known as a nondisclosure agreement or NDA.
- Performing services clause –– The contract should provide that the worker (and not a third party) is responsible for performing the services outlined in the contract and delivering the final output to the client. That is, there is no subcontracting.
- Liability insurance –– Specify in the independent contractor agreement that the contract is responsible for taking up liability insurance or workers’ compensation according to industry standards or state law.
- Non-solicitation clause –– You may or may not have a non-compete clause barring the contractor from setting up a competing business for a set time. The clause can also include non-compete guidelines that bans the contractor from offering their services to your competitors for a set period.
- The governing law –– The contract should specify the state law that governs the agreement. That law applies to the company’s location, or the state of the company’s headquarters in cases with multiple locations.
- Contract termination –– Outline the grounds for terminating the contract, including details such as the format or channels for communicating termination and the notice period before the termination becomes effective. The successful conclusion of a contract is not termination.
Insight
Examples of grounds for termination may include material breach of contract. For instance, if the contractor violates confidentiality guidelines, the business owner has the right to terminate the contract.
- Waiver –– The clause provides that a waiver of breach, omission, or default should not constitute a waiver of a subsequent breach of any part of the contract.
- Assignment –– Indicate that the contractor cannot assign obligations under the contract to a third party without the client’s prior written consent.
Warning
Working with licensed attorneys is essential to ensure that your contract is comprehensive and protects your business interest. Alternatively, you can create a printable contractor agreement on Lawrina; just add your details and use it according to your need.
What Is the Difference Between an Independent Contractor and an Employee?
Independent contractors are self-employed and have to pay self-employment taxes. For instance, an LLC independent contractor is a person who does work for a limited liability company but is not officially an employee. Each state has different rules for determining whether someone is an employee or an independent contractor. One way to clarify the arrangement is to have an independent contractor agreement that clearly indicates the worker is an independent contractor and not an employee.
A big part of an independent contractor agreement is distinguishing the independent contractor you hire from other employees who work for your business full-time. You have to do this as is mentioned for tax and legal purposes. Many businesses require employees to sign non-compete agreements as a condition of employment. Companies allow freelancers to maintain their autonomy and often only ask them to sign a non-disclosure agreement. Under this contract, the independent contractor agrees to keep company secrets or proprietary information they learn while conducting their work for the business confidential and not exploit it or inadvertently disclose it to others. This protects the business's intellectual property rights while allowing the independent contractor to continue their work.
Why Is an Independent Contractor Agreement Important?
An independent contractor agreement gives the parties clarity and consistency. Without a written contract, the parties may assume what is true. Often, these assumptions are incorrect and can lead to legal conflicts later on. People can avoid the potential hassle and confusion by entering into a comprehensive independent contractor agreement from the start.
Importance for Employers
A legally binding agreement protects employers when they hire independent contractors. Employers can reduce overhead for the company by hiring individuals to do temporary, simple, or individual tasks instead of hiring full-time employees to do the same.
Working with independent contractors provides more flexibility for non-essential tasks and a voice committing to a salary when one isn’t necessary. It is easier to terminate contracts when you have a legally binding independent contractor agreement, and it costs less to hire and file taxes on behalf of the individuals.
Importance for Contractors
Independent contractors don’t reap the same benefits as employees when they use an independent contractor agreement, but it nevertheless provides legal protection. As someone who is self-employed, you have a lower tax liability, and you have greater control over your schedule format.
For example, if you decide to work as a massage therapist in a salon, as an independent contractor, you are not supposed to come to work based on the salon schedule. This is strictly against the IRS guidelines. You can tell the employer your desired work schedule, which they can then add to their schedule. If a company tries to abuse your services by asking for things beyond the terms of the services in the agreement, you have the legal recourse to remind them that what they are asking for is outside the scope of the agreement, but you’re happy to renegotiate for higher compensation in exchange for more work.
What Should Be Included In the Independent Contractor Agreement?
A valid contractor agreement template includes the following provisions:
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Details of the parties –– Descriptive details of the parties, such as the names and contact information.
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Establishment of business relationship –– The agreement should establish a contractor and client relationship. It should also specify that the parties do not intend to establish a joint venture or a partnership through the contract.
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Description of the service the independent contractor will supply –– Carefully describe the work you, the employer, expect the contractor to deliver at the end of the contract period. For example, if a sales position, define the quotas the contractor must achieve to qualify for commissions.
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Compensation –– Mention the exact compensation the contractor will get after delivering the output. Indicate the payment schedule and the means of making the payments.
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Terms of the agreement –– How long will it take the contractor to finish the project? Provide the definite terms of the agreement, including start and finish dates.
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Contractor obligations –– Define the responsibilities of the contractor in the course of delivering the work required. For instance, mention any licenses the contractor may need, indicate that they are responsible for any employees they hire to fulfill their obligations, and any other reasonable expectations.
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Counterpart clause –– The counterpart clause provides that parties may sign the agreement in two or more counterparts (copies), and each shall be deemed as the same contract.
How To Write an Independent Contractor Agreement
A contractor-worker agreement is a legally binding agreement that establishes a client-contractor/freelancer relationship. You can download a blank template from Lawrina and use it as is or hire an attorney or law firm to help you draft one from scratch.
Insight
Independent contractors contract their services out to businesses and are considered self-employed rather than an employee of the contracting companies. Independent contractors are responsible for reporting and paying their income and Social Security taxes.
Here is how to write an agreement if you are a contractor or an employer.
For the Contractor
Provide the details of the parties indicating the legal names and contact information;
Indicate the payments terms as agreed with the client;
Define the scope of work the client requests, including delivery date;
Indicate your rates for the work described and provide a payment schedule.
For the Client/Employer
Provide the name of the work the freelancer will do;
Indicate the state or federal law that will govern the contract;
Establish that you own the intellectual property of the output;
Describe the scope of work required from the contractor;
Establish confidentiality guidelines that you want the contractor to follow;
Determine how and who can terminate the contract;
Think through your non-compete requirements within the context of your business interests;
Write how you want you and your counterparty to resolve disputes.
Warning
Work with an attorney to provide legal advice and review the entire agreement to ensure you protect your interests if you are not the one who makes the agreement. Suppose you are the party that initiates the contract. In that case, obtain the prior consent of the counterparty on critical aspects of the agreement, such as the scope of work, compensation details, and contract terms.
When Do You Need the Independent Contractor Agreement?
Consider hiring an independent worker if you do not have the resources to hire a full-time employee.
Common Use Cases
Hire an independent contractor when you:
- Need an expert to carry out work under minimum supervision;
- Have a short-term project that needs to be completed within a specified period;
- Seek to avoid the administrative aspect of managing employees, such as payroll and benefits;
- Have work that requires a certain level of confidentiality;
- Want to leverage the expertise of a contractor and gain a competitive edge over others in the industry.
When Not To Use the Independent Contractor Agreement
The IRS is keen on penalizing companies that misuse independent contractor agreement samples. Instances, when you should not use the contracts, are:
- You are responsible for paying the contractor’s taxes such as FICA and benefits like disability insurance or any other employee benefit;
- The contractor works under your close supervision and scrutiny;
- Provide the contractor with the resources they need to fulfill their work obligations and determine how what, where, and when the freelancer does the work;
- The contractor is not allowed to work with other employees who require their expertise;
- When you can’t determine how long it will take to complete the work required;
- You reimburse the contractor for the expenses incurred while undertaking the assignment.
State Law
Each state employs different tests to determine if someone is an employee (and thus entitled to benefits) or an independent contractor. Many states consider factors such as the level of control the business has over the worker and whether the worker operates a business where they provide services similar to what they do for the company. Having an independent contractor agreement may help to clarify the terms and nature of the arrangement.
There are three factors to consider when determining the governing law of an independent contractor agreement. These are:
- The state law that applies to the business’ location;
- If the business is in multiple states, the state law is the one that applies to the business’ headquarters;
- State law where the contractor will do the work.
Legal Disclaimer
Please note that Lawrina does not provide any legal services. The information on Lawrina’s Site and its downloadable content, including legal articles and templates, shall not be considered legal advice and is not guaranteed to be correct, complete, and up-to-date. If you require legal advice on your issue, we recommend you contact a qualified attorney licensed in your state. You personally assume full responsibility for any consequences, damages, and costs associated with your use of any content of Lawrina Services available on Lawrina’s Site.
By using Lawrina’s Site you agree with mentioned above and give your irrevocable consent to comply with and to be bound by the provisions of Lawrina Service terms.
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Frequently Asked Questions
Can I write my own independent contractor agreement?
You can use or purchase an independent contractor agreement template to write your own contract, whether you are a business looking for services or a freelancer looking for work. You can also write one from scratch or hire an attorney to help you do so.
When drafting the independent contractor agreement, think about what the fundamental parts of the arrangement are. For example, what is the price, preferred manner of payment, scope of work, or other details? Be sure to read everything over carefully before signing.
What should we include in an independent contractor agreement?
What you should include in an independent contractor agreement depends on your situation. Many parties choose to have key terms like the price, type of work, manner of payment, duration of the project, non-disclosure provisions, and other clauses. In many cases, it is best to be comprehensive. An experienced attorney can help you determine what is best in your specific circumstances.
How do I make an independent contractor document?
Making an independent contractor agreement requires you to write a contract that describes the relationship between you and another party. You can use this Lawrina pdf template, write your contract from scratch, or hire an attorney for help. Make sure you closely review the document before signing it. Most contracts are legally binding once everyone signs them.