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There are important terms that need to be included in any independent contractor agreement to avoid disputes and have a successful, profitable working relationship. By including the terms in a written business service contract, the parties can prevent future misunderstandings and litigation. The following will explain the basic terms that should be covered.
Parties - The name and contact information of the contractor and contracting party.
Job description - The services and/or goods to be provided and their specifications need to be clearly explained. The scope of work description should make clear that the independent contractor will retain control over how the project is performed. While the hiring party is entitled to have the job carried out according to stated standards, if too much control and supervision is exercised by the hiring party it can cause a finding that an employee or statutory employee status exists. A statutory employee is a person who works in his or her own business and deducts work-related expenses, but it still considered an employee for tax purposes.
The qualifications of any other workers used and insurance coverage or work permits may be described. The time frame for deliverables, project phases, or progress reports required can be set forth.
Compensation - The pay rate and time and form of payment must be detailed. If there is a payment structure based on progress payments or approval required before payment, the success measures should be described.
The agreement needs to make it clear that the independent contractor will be a 1099 employee, meaning that the contractor will receive a 1099 form and be responsible for payment of taxes on his or her own. The contractor will need to figure these higher self-employment tax costs into the job estimate. Cost transparency for any out-of-pocket expenses and fees should be described to avoid unfair surprise.
Termination - Because independent contractors are hired for contract jobs on a temporary basis, the agreement should provide a termination date or method of termination. This will make clear that the hiring is meant to be at will employment and give the parties an expected date of completion.
The above are examples of the most basic terms that need to be covered in an independent contractor agreement. Other terms may cover ownership of work product, ideas, and inventions, assignment, confidentiality and non-competition, governing law, arbitration, mediation, and more. Of course, the terms will vary by contract and nature of the work to be performed. US Legal Forms offers professionally drafted agreements for independent contractors to cover all types of contract jobs, at an affordable price.