An independent contractor is a natural person

Natural person

Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...

, business

Business

A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

, or corporation

Corporation

A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

 that provides goods or services to another entity under terms specified in a contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time he or she may be subject to the Law of Agency

Agency (law)

The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another to create a legal relationship with a third party...

. Independent contractors are usually paid on a freelance basis. Contractors often work through a limited company

Limited company

A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be...

 or franchise

Franchising

Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc- meaning free, and is used both as a noun and as a verb....

, which they themselves own, or may work through an umbrella company

Umbrella company

An umbrella company is a company that acts as an employer to agency contractors who work under a fixed term contract assignment, usually through a recruitment employment agency in the United Kingdom. Recruitment agencies issue contracts to a limited company as the agency liability would be reduced...

.

In the United States, any company or organization engaged in a trade or business that pays more than $600 to an independent contractor in one year is required to report

Tax information reporting

Tax information reporting in the United States is a requirement for organizations to report wage and non-wage payments made in the course of their trade or business to the Internal Revenue Service...

 this to the Internal Revenue Service

Internal Revenue Service

The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...

 (IRS) as well as to the contractor, using Form 1099-MISC. This form is merely a report of monies paid; independent contractors do not have income taxes withheld from their pay as regular employees do.

Independent contractor versus employee

Sometimes, it is not a straightforward matter to determine who is an independent contractor and who should be classified as an employee. To make a determination, the IRS in the USA advises taxpayers to look at three aspects of the employment arrangement: financial control, behavioral control, and relationship between the parties. While some independent contractors may work for a number of different organizations throughout the year, there are also many who retain independent contractor status even though they work for the same organization for the entire year.

Generally speaking, independent contractors retain control over their schedule and number of hours worked, jobs accepted, and performance of their job. This contrasts with the situation for regular employees, who usually work at the schedule required by the employer and whose performance is directly supervised by the employer. However many companies (particularly in the freight transport industry) specify the contractor's schedule, require purchase of vehicles from the company and prohibit work for other companies.

Examples of occupations where independent contractor arrangements are typical:

• Accountant
  Accountant
  An accountant is a practitioner of accountancy or accounting , which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.The Big Four auditors are the largest...
  
  
• Author
  Author
  An author is broadly defined as "the person who originates or gives existence to anything" and that authorship determines responsibility for what is created. Narrowly defined, an author is the originator of any written work.-Legal significance:...
  
  
• Barber
  Barber
  A barber is someone whose occupation is to cut any type of hair, and to shave or trim the beards of men. The place of work of a barber is generally called a barbershop....
  
   or hair stylist
  Barber
  A barber is someone whose occupation is to cut any type of hair, and to shave or trim the beards of men. The place of work of a barber is generally called a barbershop....
  
  
• Boxer
  Boxing
  Boxing, also called pugilism, is a combat sport in which two people fight each other using their fists. Boxing is supervised by a referee over a series of between one to three minute intervals called rounds...
  
  
• Courier
  Courier
  A courier is a person or a company who delivers messages, packages, and mail. Couriers are distinguished from ordinary mail services by features such as speed, security, tracking, signature, specialization and individualization of express services, and swift delivery times, which are optional for...
  
  
• Court Reporter
  Court reporter
  A court reporter, stenotype reporter, voice writing reporter, or transcriber is a person whose occupation is to transcribe spoken or recorded speech into written form, using machine shorthand or voice writing equipment to produce official transcripts of court hearings, depositions and other...
  
  
• Dry cleaner
  Dry cleaning
  Dry cleaning is any cleaning process for clothing and textiles using a chemical solvent other than water. The solvent used is typically tetrachloroethylene , abbreviated "perc" in the industry and "dry-cleaning fluid" by the public...
  
  
• Engineering Consultant
  Engineering
  Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
  
  
• Entertainer
  Entertainment
  Entertainment consists of any activity which provides a diversion or permits people to amuse themselves in their leisure time. Entertainment is generally passive, such as watching opera or a movie. Active forms of amusement, such as sports, are more often considered to be recreation...
  
  
• General contractor
  General contractor
  A general contractor is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and communication of information to involved parties throughout the course of a building project.-Description:...
  
  
• General Practitioner
  General practitioner
  A general practitioner is a medical practitioner who treats acute and chronic illnesses and provides preventive care and health education for all ages and both sexes. They have particular skills in treating people with multiple health issues and comorbidities...
  
  
• Interpreter or Translator
  Translation
  Translation is the communication of the meaning of a source-language text by means of an equivalent target-language text. Whereas interpreting undoubtedly antedates writing, translation began only after the appearance of written literature; there exist partial translations of the Sumerian Epic of...
  
  
• Lawn care worker
  Lawn
  A lawn is an area of aesthetic and recreational land planted with grasses or other durable plants, which usually are maintained at a low and consistent height. Low ornamental meadows in natural landscaping styles are a contemporary option of a lawn...
  
  
• Lawyer
  Lawyer
  A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
  
  
• Market stall
  Market stall
  A market stall is a typically immobile, temporary structure erected by merchants to display and shelter their merchandise in a street market or other setting. Stalls are easily erected, taken down or simply moved on wheels...
  
  
• Mason
  Masonry
  Masonry is the building of structures from individual units laid in and bound together by mortar; the term masonry can also refer to the units themselves. The common materials of masonry construction are brick, stone, marble, granite, travertine, limestone; concrete block, glass block, stucco, and...
  
  
• Massage therapist
  Massage
  Massage is the manipulation of superficial and deeper layers of muscle and connective tissue to enhance function, aid in the healing process, and promote relaxation and well-being. The word comes from the French massage "friction of kneading", or from Arabic massa meaning "to touch, feel or handle"...
  
  
• Doctor
• Nurse
• Newspaper Carrier
  Paperboy
  A paperboy is the general name for a person employed by a newspaper, They are often used around the office to run low end errands. They make copies and distribute them. Paperboys traditionally were and are still often portrayed on television and movies as preteen boys, often on a bicycle...
  
  
• Personal trainer
  Personal trainer
  A personal trainer is a fitness professional involved in exercise prescription and instruction. They motivate clients by setting goals and providing feedback and accountability to clients. Trainers also measure their client's strengths and weaknesses with fitness assessments...
  
  
• Private investigator
  Private investigator
  A private investigator , private detective or inquiry agent, is a person who can be hired by individuals or groups to undertake investigatory law services. Private detectives/investigators often work for attorneys in civil cases. Many work for insurance companies to investigate suspicious claims...
  
  
• Private military company
  Private military company
  A private military company or provides military and security services. These combatants are commonly known as mercenaries, though modern-day PMCs refer to their staff as security contractors, private military contractors or private security contractors, and refer to themselves as private military...
  
  
• Radio presenter
  Disc jockey
  A disc jockey, also known as DJ, is a person who selects and plays recorded music for an audience. Originally, "disc" referred to phonograph records, not the later Compact Discs. Today, the term includes all forms of music playback, no matter the medium.There are several types of disc jockeys...
  
   (in radio jargon
  Jargon
  Jargon is terminology which is especially defined in relationship to a specific activity, profession, group, or event. The philosophe Condillac observed in 1782 that "Every science requires a special language because every science has its own ideas." As a rationalist member of the Enlightenment he...
  
  , referred to as a "swing jock")
• Private security
  Security guard
  A security guard is a person who is paid to protect property, assets, or people. Security guards are usually privately and formally employed personnel...
  
  
• Professional wrestler
  Professional wrestling
  Professional wrestling is a mode of spectacle, combining athletics and theatrical performance.Roland Barthes, "The World of Wrestling", Mythologies, 1957 It takes the form of events, held by touring companies, which mimic a title match combat sport...
  
  
• Professional athlete
  Professional sports
  Professional sports, as opposed to amateur sports, are sports in which athletes receive payment for their performance. Professional athleticism has come to the fore through a combination of developments. Mass media and increased leisure have brought larger audiences, so that sports organizations...
  
  
• Real estate agent
• Sales representative
  Sales
  A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
  
  
• Short term university instructor
• Stock broker
  Stock broker
  A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
  
  
• Talent agent
  Talent agent
  A talent agent, or booking agent, is a person who finds jobs for actors, authors, film directors, musicians, models, producers, professional athletes, writers and other people in various entertainment businesses. Having an agent is not required, but does help the artist in getting jobs...
  
  
• Tattoo artist
  Tattoo artist
  A tattoo artist is an individual who applies permanent decorative tattoos, often in an established business called a tattoo shop, tattoo studio or tattoo parlour...
  
  
• Taxi Driver
  Taxicab
  A taxicab, also taxi or cab, is a type of vehicle for hire with a driver, used by a single passenger or small group of passengers, often for a non-shared ride. A taxicab conveys passengers between locations of their choice...
  
   or limosine driver
• Telephone and live chat psychic
• Tradesman
  Tradesman
  This article is about the skilled manual worker meaning of the term; for other uses see Tradesperson .A tradesman is a skilled manual worker in a particular trade or craft. Economically and socially, a tradesman's status is considered between a laborer and a professional, with a high degree of both...
  
  
• Tutor
  Tutor
  A tutor is a person employed in the education of others, either individually or in groups. To tutor is to perform the functions of a tutor.-Teaching assistance:...
  
  

Pros

• Since they are rarely tied to an employer, they are free to set their own rules of business, limited only by bargaining power
  Bargaining power
  Bargaining power is a concept related to the relative abilities of parties in a situation to exert influence over each other. If both parties are on an equal footing in a debate, then they will have equal bargaining power, such as in a perfectly competitive market, or between an evenly matched...
  
  .
• Since they usually develop a large network of clients, the loss of one or two often has a negligible effect.
• Many people simply like the idea of "being your own boss." Aside from materialistic benefits, many people simply enjoy not having to answer to a supervisor.
• As an artist/author of any tangible artwork, such as paintings, sculptures, photographs, or written works, you are entitled to exclusive copyright ownership if you created the work as an independent contractor. If you created such works while in the employ of another person or corporation, the rights belong to the employer (under most standard employment contracts).

Cons

• In the United States misclassification of employees as "independent contractors" to avoid taxation and regulation is widespread.
• Most independent contractors are usually also owners of a sole proprietorship
  Sole proprietorship
  A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits and has unlimited responsibility for...
  
  , and as such, bear all the expenses of their product, which can be made up only by charging customers accordingly.
• Income taxes for independent contractors are drastically more complicated than of employees.
• There are several monetary incentives that are guaranteed to employees in the United States
  United States
  The United States of America is a federal constitutional republic comprising fifty states and a federal district...
  
  , but not independent contractors. Examples include worker's compensation and unemployment insurance.

An independent contractor in tort

The employer of an independent contractor is generally not held vicariously liable for the tort

Tort

A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...

ious acts and omissions of the contractor, because the control and supervision found in an employer-employee or Principal-Agent relationship is lacking. However, vicarious liability will be imposed in three circumstances:

1. where the contractor injures an invitee
   Invitee
   In the law of torts, an invitee is a person who is invited to land by the possessor of the land as a member of the public or one who is invited to the land for the purpose of business dealings with the possessor of the land...
   
    to the real property
   Real property
   In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
   
    of the employer,
2. the contractor is involved in an ultra-hazardous activity (one likely to cause substantial injury, such as blasting with explosives), or
3. the employer is estopped
   Estoppel
   Estoppel in its broadest sense is a legal term referring to a series of legal and equitable doctrines that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative...
   
    from denying liability because he has held out the independent contractor as if he were simply an employee or agent.

See also

• Subcontractor
  Subcontractor
  A subcontractor is an individual or in many cases a business that signs a contract to perform part or all of the obligations of another's contract....
  
  
• Performance bond
  Performance bond
  A performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.A job requiring a payment & performance bond will usually require a bid bond, to bid the job...
  
  
• General contractor
  General contractor
  A general contractor is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and communication of information to involved parties throughout the course of a building project.-Description:...
  
  
• Contingent Workforce
  Contingent Workforce
  A contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants...
  
  
• Real estate trends
  Real estate trends
  Real estate trends is a generic term used to describe any consistent pattern or change in the general direction of the real estate industry which, over the course of time, causes a statistically noticeable change...
  
  
• Inside contracting
  Inside contracting
  Inside contracting is the practice of hiring contractors who work inside the proprietor's factory. It replaced the putting out system, where contractors worked in their own facilities. Inside contracting was the system favored by the Springfield and Harper's Ferry Armories...
  
  
• Misclassification of employees as independent contractors
• Independent test organization
  Independent test organization
  An independent test organization is an organization, person, or company that tests products, materials, software, etc. according to agreed requirements. The test organization can be affiliated with the government or universities or can be an independent testing laboratory...
  
  

External links

• Independent Contractor Rights
• http://www.irs.gov/taxtopics/tc762.html