An independent contractor is an individual or entity that provides services to another party under a specific contract or agreement. Unlike traditional employees, independent contractors are not considered employees of the contracting party. Instead, they operate as separate entities, typically running their own businesses or offering specialized services to multiple clients.
Independent contractors have a high degree of control over how they perform their work. They determine their own work schedules, use their own tools and equipment, and have the flexibility to accept or reject projects. Typically, independent contractors work based on contractual agreements, which outline the terms and conditions of the work to be performed, including the scope, payment terms, deadlines, and other relevant details.
Independent contractors often operate as their own business entities, such as sole proprietors, partnerships, limited liability companies (LLCs), or corporations. They may have their own business name, logo, and branding too. Usually, they are paid a negotiated fee for their services, often invoicing the client for completed work. Because independent contractors are not employees, they are responsible for handling their own taxes and often don't receive traditional employee benefits, such as health insurance, retirement plans, or paid time off from the contracting party.
Independent contractors are generally responsible for their own business expenses, including equipment, supplies, travel, and overhead costs. They often work for multiple clients simultaneously or over time, allowing them to diversify their income sources and reduce dependency on a single client. Many are hired for their specialized skills or expertise in a specific field, such as consulting, writing, design, IT, or construction.
The legal classification of independent contractors can vary by jurisdiction. Misclassifying workers can lead to legal and financial consequences for both parties.