Using Independent Contractors

Posted by: Rod Kurtz on June 9, 2009

Being an entrepreneur is hard. You are a jack of all trades, master of some, and have more jobs than can fit under one title. To get help, many times you’ll want to hire a contractor. And while it sounds simple enough, there a few hassles you’ll want to know about before signing a contract. Here are some things to consider:

First, make sure you really are hiring a contractor and not an employee. If she does work for other clients, uses her own equipment, and does most of the work from a location other than yours, you should be in good shape. But it’s always a good idea to check the IRS guidelines.

Second, make sure to put a contract in place that both clarifies the relationship between you and the contractor and outlines the work to be done and the compensation to be given. You will often see these written up as ICAs, or independent contractor agreements. They cover confidentiality, ownership of the work that’s done, and the fact that there is no employee relationship. They also should outline exactly what work will be performed, at what price, and when payment should be made. You can find some examples on sites like Docstoc.com.

Lastly, make sure you keep track of how much you pay contractors. For any contractors you pay more than $600 in a year, you need to send them, and the government, a 1099—or as it’s properly called, a Form 1099MISC—at year’s end.

Kevin Reeth
CEO and Co-Founder
Outright.com
Campbell, Calif.

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