Minimum Requirements for Working as an Independent Contractor

Be Sure You Want to Be Self-Employed

 PeopleImages / Getty Images
PeopleImages / Getty Images

Not everyone is suited to be their own boss. Before you make this leap, ask yourself two important questions:

Does self-employment suit your life circumstances?

If you are fortunate enough to have (or be able to get) well-paid, secure employment with benefits and reasonable job satisfaction, it may not make sense to become self-employed, no matter how great your desire to become an entrepreneur

Organizing vacations, making major purchases, and planning retirement are much easier (and less stressful) when you have a steady paycheck and regular working hours, particularly if you have dependents. 

Thoroughly examine your lifestyle, financial situation, and future retirement goals—and discuss them with your family—before making the jump to self-employment.

Is your personality suited to self-employment?

Being your own boss has many advantages, but it also means all the responsibility for the success of your business (including income) rests on your shoulders. If your personality is such that dealing with the uncertainties of self-employment is likely to cause you a great deal of stress and anxiety, then being an entrepreneur is probably not for you. 

Sign a Contract

It seems simple, but you'd be surprised how many freelancers and business enter a working relationship without a contract. Bottom line: don't do it.

For contractors

When you're moving from one project to the next, there's an added layer of complexity. Not only do you need to track down and procure new clients on an ongoing basis, but you also need to manage the quirks and demands of multiple bosses and organizations. For most people, answering to just one demanding manager is more than enough to keep you on your toes. The best, and sometimes only, protection you can have in a temporary work relationship is a contract that lists all of your primary duties and expectations and includes details on financial compensation, the range of dates, and any other relevant factors.

While a larger organization can absorb the impacts of an unpaid bill or the occasional overbearing or abusive customer, the effects of such issues on an independent contractor can be devastating. What will happen if your employer moves to terminate your position early, asks for a scope of work above and beyond the original request, or in some other way bends or breaks the fundamental rules you established?

Even notes and documented emails are rarely enough to rectify the situation in your favor. You need that legal, signed document to back it up.

For businesses

For the organization hiring outside help, a contract is just as imperative, protecting the employer from unsatisfactory performance, padded billing, and missed deadlines. While in most cases, the legal document need not be exhaustive, it should cover the basic parameters and a broad range of possibilities. Whether you're using an agreement created by the freelancer or a standard document drawn up by your company's legal team, consider covering payment structures, ownership of work produced, and scheduled extensions, as well as exclusivity or non-exclusivity clauses, kill fees, and responsibility for indemnity against future loss.

And remember, contracts are genuinely beneficial to all parties involved, so your freelancer should be happy to sign—if they're not, it's probably a sign it's not a good fit.

Here's a guide on how to draft a freelance contract agreement to help get you started.

Video

18. Apartment Complexes

Apartment complexes are often managed by large property management firms or regular leasing employees. Large property management firms manage multiple apartment complexes. Guess what they all need to do every few years? Paint, and 40 year recertifications. This will lead to a lot of remodeling or rework of existing buildings.

13. Construction Management Firms

When planning a bigger project, owners often hire a construction manager that will be responsible for the overall project, and this construction manager usually breaks up the project into smaller pieces and hires general contractors and subcontractors. If you are interested in building big projects, this is a great type of client to pursue.

2. FlexJobs

FlexJobs is the source for freelance, remote, part-time, and independent contractor jobs of a similar kind. The biggest advantage of this platform, as FlexJobs stresses, is that they hand-screen every job listing for legitimacy.

How to distinguish an independent contractor from an employee

The IRS looks at certain factors to see if a worker should be classified as an independent contractor or an employee of a company. Attorney Christy L. Foley said these questions can help you determine how to classify a worker:

  • When, where and how is the work done? Is the work performed at the employer’s place of business, or does the independent contractor work remotely? Does the employer set the hours, or can the independent contractor work whenever they want? Does the employer provide the tools, or does the independent contractor use their own equipment?
  • Is the worker required to complete company training?Independent contractors usually do not have this requirement.
  • Is the worker doing full-time, ongoing/continual work? Or are they doing temporary work on projects that have specific end points?
  • Is the worker paid hourly, weekly or monthly?Or do they get paid once an entire project is complete?
  • Does the company pay for travel?For employees, travel costs are usually covered by the company. Independent contractors, however, pay their own travel costs (and earn enough on the overall project that those costs end up being covered by the fee they’re paid).

“Technically, the IRS has about 20 factors that it looks at in determining whether someone’s an employee or an independent contractor,” Foley said. “However, the ones listed above are the most commonly used.”

Key takeaway: When determining whether to classify workers as an employee or a contractor, consider when, where and how they do the work; how they’re paid; and whether company-specific training is required, among other factors.

Determining Whether the Individuals Providing Services are Employees or Independent Contractors

Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be:

  • An independent contractor

  • An employee (common-law employee)

  • A statutory employee

  • A statutory nonemployee

  • A government worker

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

3. Keep a Project Journal

Your project journal is your friend and ally. Use it to:

  • Record progress.
  • Note things you want to ask your contractor.
  • Jot down ideas.
  • Record product order numbers.
  • Note upcoming delivery dates.

A journal helps keep communication clear, and provides a record of who said what when — which could help you iron out disputes later on.

Form SS-8

If it is still unclear whether a worker is an employee or an independent contractor after reviewing the three categories of evidence, then Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax WithholdingPDF, can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take at least six months to get a determination. A business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8PDF.

Important skills and qualities for contractors

These are some important skills independent contractors need to find success:

  • Organization: Contractors must manage their projects, tasks and clients daily, making organization very important. Depending on the work they do, they may need to track physical materials and keep a tidy space to access necessary documents.

  • Persistence: It can be difficult to build a robust client base as a contractor, so persistence is an important quality to have. It allows contractors to continue striving for success even when it's difficult.

  • Confidence: Having confidence in services allows contractors to provide excellent service and price their services correctly. Having confidence in their work means they charge what they should, rather than pricing services low.

  • Communication: Contractors work directly with their clients to schedule, negotiate and refine their services. The ability to communicate includes understanding the client's needs and articulating details about services.

  • Originality: Many contractors provide creative work, meaning originality can help to separate them from other contractors and elevate their services. Even when the services aren't strictly creative, originality in marketing and approach and improve a contractor's ability to find clients.

Related: 18 Creativity Exercises To Improve Creative Thinking and Problem-Solving at Work

Start Soliciting Clients

Contact any business associates from your field to let them know you are seeking contract work. Check the terms of your employment if you are still employed by a company or recently resigned, as some companies include a no-compete clause that prevents you from contacting business associates or clients from that company.

Make sure you have business cards, a brochure and possibly a P.O. Box to make your business look more professional, recommends Knew Money.com.

Contact local businesses that could utilize your contracting services. Ask to schedule a meeting with the person in charge of hiring contract workers. Present an informational package that highlights your strengths and services. Follow up with each company if you do not hear back from them.

Amendment to Independent Contracting Agreement

Often, throughout the lifetime of an independent contracting relationship, certain expectations or elements of the relationship will change. These changes are almost always limited to the statement of work and include price, performed services, or certain covered costs. The changes do not include other legal elements of the relationship that are contained within the body of the Independent Contracting Agreement. The Amendment to the Independent Contracting Agreement Statement of Work seen here lets the parties amend the Statement of Work easily. Complete the Amendment and attach a new Statement of Work as the parties want it to read. It will replace the old Statement of Work from the date of the amendment.

4. Upwork

Unlike the previous two, Upwork is an exclusively

Unlike the previous two, Upwork is an exclusively freelance platform that operates worldwide. Upwork is beginner-friendly, but it takes a fair share of your earnings until you build up a regular relationship with your clients.

Tips for Hiring the Right Contractor

When hiring a contractor in California, you want to make sure you find a professional who has the skills necessary to complete your project and will offer you the best price possible. Fortunately, by following a few simple tips, you should be able to find a contractor who meets your precise needs.

First, you should be sure that you get bids from at least three contractors. Make sure you understand how each contractor reached their estimate and ask for clarification if you're confused about the price you have been quoted. Understand that the lowest price is not always the best, and an estimate that's considerably lower than other quotes is a cause for suspicion.

Second, be sure that you thoroughly review the contract before signing. Look for a full description of the work that will be completed, including what materials the contractor will use. You should also be sure that you understand your right to cancel the contract. In California, home improvement contracts must include a provision that gives the homeowner three days to cancel the agreement. The exception to this rule is only for contracts that cost less than $750 for materials and labor.

If you're planning to spend more than $500 on your project, you should carefully research licensing for the individual contractor or contracting business you are thinking about hiring. Licensing information can be checked with the Contractor's State License Board.

California requires that all home improvement contracts inform homeowners of their rights and legal protections. The state also requires that contractors obtain a license for the specific type of work they offer. When hiring a contractor, check their license to make sure they are legally allowed to perform the work for which they have been hired.

Get a Tax Registration Certificate

Many cities and counties require every business — even single-owner, home-based operations — to register with the local tax collector and obtain a tax registration certificate. This certificate is sometimes called a business license, but it is essentially a receipt for the tax you must pay for the privilege of doing business in a city, and nothing more.

If you operate your business out of your home, you usually need to get a tax registration certificate in the city where you live, even if none of your clients are in that city. Contact your city clerk for an application.

Skipping This Requirement

Some independent contractors fail to register, figuring they can stay under the local government’s radar. But consider this: Tax registration certificates are inexpensive, while the penalties for operating without a license can be hundreds of dollars. In addition, in some locales it is a misdemeanor to violate city ordinances by operating without a tax registration certificate.

Create Your Pricing Strategy

Set your fees for your contract work according to industry standards. Research the average cost for that type of work in your geographical area before bidding on a project. Pricing yourself too high turns away clients, while pricing too low makes you lose money and may cause potential clients to think you are not qualified.

Dont Try to Do Everything

 Tetra Images / Getty Images
Tetra Images / Getty Images

If your business is growing and you are finding that there are not enough hours in the day, consider sub-contracting some of your non-core tasks. Do you really want to be your own web designer or manage your business social media postings? Or deliver product to customers yourself? Or make your own travel arrangements? Or keep your own books and do your own taxes?

Outsourcing some of these ancillary tasks can free up more time to focus on your core business activities. If you have family members that can perform some of these duties, that may come with some tax benefits.

How To Find Work as a Contractor

Whether you’re searching for independent contractor jobs near me, you can do a Google search or take a look at the job sites like Indeed, Monster, or Zip Recruiter. You might have more success on sites created specifically for contractors to find work, such as your local union’s website, contractor job boards, or contractor job sites. Here are a few examples:

Contractor networking groups are also a good place to look for work. Many local Association of Builders and Contractors chapters operate an independent contractor website or job board. The Association of General Contractors and most Builder’s Associations also host networking events.

You can also utilize online construction networking sections of websites such as MeetUp, which is designed to help connect professionals with network events in their local area.

Many general contractors will also list jobs they need to fill either for full-time employment or as subcontractors or independent contractors. A Google search for “general contractors near me” is a simple way to find these sites.

Prioritize Onboarding

In an ideal world, a contractor can jump right in and hit the ground running, but just as that's not the case for employees, it's also rare for contractors.

For contractors

You'll likely have to perform a lot of behind-the-scenes legwork detailing the project specifications and development. You need to take time to learn who's responsible for what within the organization, how your role fits in, and where you can access necessary resources. All of this takes valuable time, but it will make the meat of the project much easier.

When coming up with an estimate—both for payment and time-to-complete—be sure to include some time to familiarize yourself with the organization, personnel, and specific project. And if you feel like your client is rushing you for a deliverable, be sure they understand exactly what's holding you up and why you're getting your sea legs first.

For businesses

Having an organized onboarding process and providing the small and large details to get temporary hires up to speed will make for a more serendipitous arrangement for all.

There are specific laws (that vary by state) about how much training—if any—you're allowed to give contractors, so be careful about that. But any information you do need to give the contractor should be provided upfront so it doesn't disrupt the workflow down the line.

The most important thing to remember when establishing a working contract relationship is that both parties should assume the best intentions in the other. As a contractor, you may not get an invite to the annual holiday party, but that doesn't mean the organization doesn't value you. And as an employer, you might feel put out when a contractor requests a rate you feel is unreasonable, but remember that they are basing their rates on what they need to make a living. Foster a culture of respect—just like you would in an employer-employee relationship—and you'll be set up for a successful contract.

Contract image and image of file in folder . Candidate selection image designed by Freepik.

Tags

Leave a Reply

Your email address will not be published. Required fields are marked *