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11 Things to Know Before You Sign an Independent Contractor Agreement

Updated on January 1, 2013

Many employers decide to contract with independent contractors because it saves them money on taxes; however, there are some advantages to being an independent contractor, but most employers use their contractors same as employees. Here are the top eleven reasons one should know before they sign an Independent Contractor Agreement:

Intellectual property

If one is creating art, written work, and computer programs or going down other creative avenues, then it may be best to be an independent contractor. Usually, the creator of the piece owns all rights, but in some agreements the contract will say that the creations will belong to the company and then one is giving up their main advantage to being a contractor.


As an independent contractor, one will have to pay all of their Social Security and Medicare taxes. While employees pay half because their employer pays the other half. This to some is a big chunk of pay to be giving up, so be sure this is what one really wants/needs. However if you feel that you are being used as an employee you can fill out a form from the IRS, which might be able to get the employer to pay what they owe.


If one is performing services for someone or a company and they control how you do it and what you do, you are probably misclassified and really should be an employee. That means if the employer controls the time, place, and what you do each and every day at work you are an employee and not an independent contractor. Being an independent contractor, they decide to do the when they what and how they choose. Nobody tells that what they should and should not do and what hours they are allowed and not allowed to work.


Also if they say what equipment to use, where to buy it, or they provide one with a desk, that is a good indication that one is an employee also. Being independent contractors usually use their own equipment and supplies.


If the company says so and so will work with you and you cannot choose anyone to help with the tasks at hand, then you will be an employee. Being and independent contractor can hire anyone they please or they can work alone.


If the company/ employer do an evaluation on you about the process and methods of your work, you may be considered as an employee. The only time you should be evaluated is on the results of your product not how you got to the end results.


If you get trained on how the company/employer wants the job done, then do not sign the contract because you will be misclassified. However, it is okay to train independent contractors, but it should be minimal and it should just be instructions on what the overall product should have.

Financial control

Employers/companies will reimburse many expenses, but contractors will have to purchase their own equipment. Normally contractors are paid by the job, sometimes a company or an employer will pay by the hour, but that is not very common. A contractor does have more opportunity to make a lot of profit rather than an employee.

Opportunity to work elsewhere

The best part about being and independent contractor is you can always take up more work if you please, so you can make a lot more money than an employee. You are better off working for than one company, so you have a nice savings when jobs become scarce.


If you get offered insurance and other benefits you are likely an employee and not a independent contractor. Yes, this can sound good because everyone wants insurance and the whole nine yards, but you do not want to be paying for everything just for those benefits either.

Indefinite time

Being an independent contractor you are contracted for a specific period of time, as opposed to an employee. Most of the time you are only contracted for the length of the project or series of projects; if they do not give you a time frame of when the project will be over you may as well be an employee for that matter.

These 11 tips will help you decide if you will actually be an independent contractor or the company is trying to take advantage of you. If you feel that the company is trying to take advantage of your services it is best that you do not contract with them.


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