What should be in an Independent Contractor Agreement

An Independent Contractor Agreement is the perfect agreement for business owners in need of a contract to hire contractors or freelancers to provide services.

As a business owner you need to hire help occasionally and if that individual or company does not have an agreement to cover the legal terms (or one that you agree with) here's what to include in your own.

Note that this post is all about hiring help as a business owner. I distinguish independent contactor agreements as contracts use to hire services. 

If you are a service provider (meaning you're the one giving the services), I suggest using a specific client agreement that outlines your requirements.

With that settled, let's discuss what goes into an independent contractor agreement (for hiring contractors).

Contractor Duties

First, your contract must include what services the contractor will provide for your business.

This should be more specific than simply "consulting" or "logo design."

Instead, you want to outline exactly what the contactor will do for you. For instance, if it is a type of consulting, describe what type of consulting and the topics to be covered.

The contractor may have a package containing a description of their services and if detailed enough, you can take that package description and include it here. 

Statement of Work

Now, if you want to get really detailed, you can also attach something known as a statement of work.

This attachment is a more specific outline of:

services to be provided, when, pricing, point persons, etc.

It's not a necessary aspect of a contractor agreement, but you can include one if you have specific drawings, outlines, and timetables that you want to contractor to adhere to noted all in one place.

Fees

This section outlines how much you will be pay the contractor and when.

The payment structure will vary depending on the contractor's requirements.

Some variations include:

1x flat fee

Hourly

Monthly

Deposit with balance due upon completion

As with the description of services, the important thing here is to be clear about what is owed and when. 

Expenses

When it comes to expenses, typically the independent contractor will cover their own expenses necessary to do the job.

That said, depending on the services there may be costs associated with you, the client, that the contractor will want to be reimbursed for.

In those cases, the contract states that the client will only reimburse pre-approved expenses.

The contractor will submit receipts to the client for reimbursement.

Milestones / Deliverables

Next up, to set expectations for both you, the independent contractor agreement should include a schedule of what will be delivered to you and when.

If you will not attach a statement of work, that's no problem. Just include a milestones / deliverables section that shows what is due, by whom and when.

Provide anticipated dates for completion of each stage.

And if you need to submit materials to the contractor so that the contractor can fulfill the services, those items may be listed here with due dates as well.

Having a schedule of deliverables in the contract helps keep everyone on track.

IP Ownership (Copyright)

Will the contractor create a digital asset for your business use?

Do you want to have ownership of this intellectual property?

If the contractor will create an intangible asset for your business that you can store in a "cloud" than you'll want ownership.

In that case, include a "work made for hire" clause in your independent contractor agreement.

This will assign the digital asset to you upon completion and you will hold the copyright (not the contractor).

In fact, this is actually what you're purchasing if they are being hired to create something for your ownership after the job is complete.

Your ability to use that digital asset with the right to sell, transfer, copy, etc. may be necessary for your use so including this clause is a must to establish the ownership of the work.

Contractor Status

Also, it's important to include that the independent contractor is, well, exactly that. You want to note that they are acting in their own capacity and not as an employee in your business.

This comes into play at tax time as you will be expected to issue the contractor a 1099 for payments that exceed $600.

And, of course, the IRS has strict classification rules for contractors versus employees with penalties for misclassification.

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Use a Solid Independent Contractor Agreement

My Independent Contractor Agreement Template  is full of the terms you need to hire a contractor to provide services for your business with the proper legal protection.

This template is simple to use. Fill in the blanks and you’re ready to go! It is also easily modifiable to suit needs specific to your business.

Want a robust contract bundle instead? Purchase it as part of 15 templates in Legally Good Club.

To learn more about Legally Good Club and get tips on how to protect your business legally starting today, watch my free legal workshop.

This blog posting is provided for general informational and educational purposes only and is not provided for specific, individual legal advice.