Independent Contractors

An independent contractor is a self-employed individual or business that provides goods or services to another party under a contract or agreement. Unlike employees, independent contractors operate as separate entities, controlling how and when they perform their work, and are responsible for their own taxes, insurance, and business expenses.

Key characteristics of independent contractors include:

• Autonomy and Control: They have significant control over the means and methods of their work, unlike employees who follow employer instructions closely.
• Contractual Relationship: They work under specific contracts, often project-based, which outline the terms of their engagement.
• Financial Responsibility: They manage their own tax obligations, benefits, and work-related costs, without employer-provided benefits like health insurance or retirement plans.
• Multiple Clients: Independent contractors often serve multiple clients simultaneously, rather than working exclusively for one employer.
• Specialized Skills: They typically offer specialized skills or knowledge and may work in professions such as electricians, plumbers, lawyers, accountants, and others.

In legal terms, employers generally do not have control over independent contractors and are not liable for their actions in the same way they are for employees, except in certain cases involving inherently dangerous activities or non-delegable duties.

In the U.S., companies paying independent contractors more than $600 annually must report payments to the IRS using Form 1099-NEC, reflecting the contractor's independent status and tax responsibilities.

Summary Table: Independent Contractor vs. Employee

Aspect	Independent Contractor	Employee
Control over work	High autonomy; controls how and when to work	Employer controls work methods and hours
Tax and benefits	Responsible for own taxes and benefits	Employer withholds taxes; provides benefits
Work relationship	Contract-based, project or service specific	Ongoing employment relationship
Multiple clients	Often works for multiple clients	Typically works for one employer
Liability	Employer usually not liable for contractor's acts	Employer liable for employee's acts

This classification affects legal rights, tax treatment, and eligibility for employment protections.