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Sample Independent Contractor Agreement PDF Free Download
What is an Independent Contractor
An independent contractor is classified by the IRS, under 26 CFR 31.3121(d)-1, as someone who conducts the following activities:
Able to control how their services are completed;
Able to work their own schedule and hours;
May control their work attire;
Salespersons paid solely on commission (except insurance salespersons);
Uses their own tools and equipment when performing services; and
Part-time corporate officers.
Ultimately, an independent contractor is an individual who has their own boss and sets their own rules to justify how they work and their output.
Generally speaking, if an individual is paid on a per-project or task manner, they will most likely be considered an independent contractor.
If the individual is paid a salary, must adhere to a specific schedule, and is dictated what to do in every facet of their workday, they will most likely be considered an employee.
Independent Contractors: By Right (IRS)
Specifically, the following professions are independent contractors by right under IRS Rules:
IRS Tax Forms
IRS Form W-9 – Must be completed by an independent contractor before any services are provided or an agreement is made.
This form is not filed with the IRS but is required to be held by the payer of services for at least four (4) years.
IRS Form 1099 – To be filed with the IRS at the end of the year if the payer paid an independent contractor $600 or more.
Must be filed by January 31st following the calendar year.
How to Become an Independent Contractor
Becoming an independent contractor allows a person to be self-employed and start their own business.
An individual may work as a sole proprietor by using their personal name to conduct business activity.
Although, for tax reasons, it is highly recommended for an independent contractor to incorporate.
Step 1 – Search a Business Name
Look up a business name you wish to incorporate by entering your Secretary of State Database.
After entering the selected name, if there are no results then usually the name is available.
To confirm a name is available, an individual may file a Name Reservation Request and reserve the name for 30 to 120 days.
Step 2 – Conduct a Trademark Search
Use the USPTO in order to conduct a trademark search of your business name.
For example, if you happen to choose the name ‘Frank’s Hot Sauce’ it could be a trademarked name.
If there is no trademark for the business use then the incorporation can proceed.
Step 3 – Choose Type of Entity
Select the type of entity that best fits your needs.
Due to every individual having their own financial needs it’s recommended to meet with an accountant before ultimately deciding which entity is best.
LLC – The owners, known as “members”, own as a percentage (%) of the company, not shares. An LLC can choose to be taxed either as an S-Corp or C-Corp.
C-Corp – Business is taxed at the corporate level of *21% (*Public Law No: 115-97)
S-Corp – All profits pass through to the owners and are taxed at their personal income rate.
Creditors may go after the partners on a personal basis.
Meaning if the partnership owes debts a partner’s personal vehicle and home are subject to seizure.
Sole Proprietorship – Going into business under your personal name.
If an LLC, Corporation, or Partnership was created there will be additional documentation in the form of the following to detail ownership, individual roles, and any other rules for the business:
Corporation – Corporate bylaws are required to state when annual meetings are to occur along with other administrative items.
LLC – An operating agreement is needed to outline the day-to-day functions of the company and the ownership percentage.
Partnership – A partnership agreement states the ownership percentage, roles of each partner, partnership purpose and how it will operate on a day-to-day basis.
Every individual and business in the United States is required to either have a Social Security Number (SSN) or an Employment Identification Number (EIN) to conduct financial transactions.
Unlike an SSN that an individual gets upon birth or citizenship, an EIN can be obtained by using the IRS Website.
The process is free and takes about 10-15 minutes by answering a series of questions.
Business Licenses, Permits, and Certificates.
The Contractor represents and warrants that all employees and personnel associated shall comply with federal, state, and local laws requiring any required licenses, permits, and certificates necessary to perform the Services under this Agreement.
Federal and State Taxes.
Under this Agreement, the Client shall not be responsible for:
Withholding FICA, Medicare, Social Security, or any other federal or state withholding taxes from the Contractor’s payments to employees or personnel or making payments on behalf of the Contractor; Making federal or state unemployment compensation contributions on the Contractor’s behalf; and the payment of all taxes incurred related to or while performing the Services under this Agreement, including all applicable income taxes and, if the Contractor is not a corporation, all applicable self-employment taxes.
Upon demand, the Contractor shall provide the Client with proof that such payments have been made.
Benefits of Contractor’s Employees.
The Contractor understands and agrees that they are solely responsible for shall be liable for all benefits that are provided to their employees, including but not limited to, retirement plans, health insurance, vacation time off, sick pay, personal leave, or any other benefit provided.
The Contractor shall be solely responsible for the unemployment compensation payments on behalf of their employees and personnel.
The Contractor shall not be entitled to unemployment compensation in connection with the Services performed under this Agreement.
The Contractor shall be responsible for providing all workers’ compensation insurance on behalf of their employees.
If the Contractor hires employees to perform any work under this Agreement, the Contractor agrees to grant workers’ compensation coverage to the extent required by law.
Upon request by the Client, the Contractor must provide certificates proving workers’ compensation insurance at any time during the performance of the Service.
The Contractor shall indemnify and hold the Client harmless from any loss or liability from performing the Services under this Agreement.
The Contractor acknowledges that it will be necessary for the Client to disclose certain confidential and proprietary information to the Contractor in order for the Contractor to perform their duties under this Agreement.
The Contractor acknowledges that disclosure to a third party or misuse of this proprietary or confidential information would irreparably harm the Client.
Accordingly, the Contractor will not disclose or use, either during or after the term of this Agreement, any proprietary or confidential information of the Client without the Client’s prior written permission except to the extent necessary to perform Services on the Client’s behalf.
Proprietary or confidential information includes, but is not limited to: Written, printed, graphic, or electronically recorded materials furnished by Client for Contractor to use; Any written or tangible information stamped “confidential,” “proprietary,” or with a similar legend, or any information that Client makes reasonable efforts to maintain the secrecy of business or marketing plans or strategies, customer lists, operating procedures, trade secrets, design formulas, know-how and processes, computer programs and inventories, discoveries, and
improvements of any kind, sales projections, and pricing information; and information belonging to customers and suppliers of the Client about whom the Contractor gained knowledge as a result of the Contractor’s Services to the Client.
Upon termination of the Contractor’s Services to the Client, or at the Client’s request, the Contractor shall deliver to the Client all materials in the Contractor’s possession relating to the Client’s business.
The Contractor acknowledges any breach or threatened breach of confidentiality that this Agreement will result in irreparable harm to the Client for which damages would be an inadequate remedy.
Therefore, the Client shall be entitled to equitable relief, including an injunction, in the event of such breach or threatened breach of confidentiality.
Such equitable relief shall be in addition to the Client’s rights and remedies otherwise available at law.
|No. of Pages||5|
|PDF Size||2 MB|
Sample Independent Contractor Agreement PDF Free Download