Independent contractors are business owners
Independent contractors are business owners who have built a business around their specialized skills and services they offer. Independent contractors may be classified as a sole proprietor or have an incorporated business. Independent contractors may also have a business name and may partner with others. They may have their own employees, subcontractors, or partners who help them complete a work task.
A relationship with an independent contractor is a business-to-business relationship. Often time it is easy to think of them as employees, but in doing so can put you at risk for misclassification.
Independent contractors have specialized expertise.
A great way to fill a business need is to hire independent talent. These individuals bring specialized expertise to a project or task—certification, special training, or education. As their client, you are not responsible for providing training to the independent contractor.
Independent contractors may work with multiple clients.
Since an independent contractor is running their own business, they have the right to take on multiple clients or contracts. Even though, you may have a long-term contract with them, does not mean you can limit them to work with others.
Independent contractors work on specific tasks and works without oversight.
Independent contractors are contracted to work on a specific job or services, generally outlined in an agreement that outlines expectations with both parties, time frame, and payment terms. Traditional employees generally receive instructions from a manager. However, a client cannot determine how an independent contract works. An independent contractor will also provide their own tools, equipment, etc.
Independent contractors determine their hours and submit invoices for payment.
Since an independent contractor are their own business entity, they set their own hours. A client cannot determine their work hours. The independent contractor must fulfill the work agreement. Independent contractors also do not work for a salary. Independent contractors will submit invoices to the client for their work as outlined in the contract.
Independent contractors are responsible for paying their own taxes and benefit plans.
Since the independent contractor is their own business entity, the client will have the independent contractor fill out a W-9, and will issue and submit a 1099-MISC on payments made to them. As the client you do not have to worry about withholding taxes like you would with a traditional employee. Another benefit to having an independent contractor is that you do not have to provide traditional benefits such as health insurance, stock options, or retirement plans.