{"id":271,"date":"2011-12-12T15:13:58","date_gmt":"2011-12-12T23:13:58","guid":{"rendered":"http:\/\/foundersnetwork.com\/?p=271"},"modified":"2018-11-11T16:08:07","modified_gmt":"2018-11-12T00:08:07","slug":"independent-contractor-guide","status":"publish","type":"post","link":"https:\/\/foundersnetwork.com\/independent-contractor-guide\/","title":{"rendered":"Guide To\/For Independent Contractors"},"content":{"rendered":"<p><em>The following is a guest post from fnBlog Contributor Matthew Faustman, founder of\u00a0<a href=\"http:\/\/upcounsel.com\/\" target=\"_blank\" rel=\"noopener\">UpCounsel<\/a>. \u00a0Check out other great startup advice like <a href=\"http:\/\/blog.upcounsel.com\/startup-legal-tips\/\" target=\"_blank\" rel=\"noopener\">Startup Legal Tips<\/a> and <a href=\"http:\/\/blog.upcounsel.com\/free-legal-startup-documents\/\" target=\"_blank\" rel=\"noopener\">Free Legal Documents<\/a> at the <a href=\"http:\/\/blog.upcounsel.com\" target=\"_blank\" rel=\"noopener\">UpCounsel Blog<\/a>.<\/em><\/p>\n<p><a href=\"http:\/\/blog.upcounsel.com\/wp-content\/uploads\/2011\/12\/ICPic.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-363\" src=\"http:\/\/blog.upcounsel.com\/wp-content\/uploads\/2011\/12\/ICPic-292x300.png\" alt=\"\" width=\"287\" height=\"280\" \/><\/a>Independent Contractor (a.k.a. consultants, contractors, subcontractors) have always been a cornerstone of many industries. \u00a0 Employers see independent contracting as a great way of handling short terms projects without having to hire a full blown employee.<\/p>\n<div>\n<p>Independent contracting within the technology industries has\u00a0exploded over the past 10 years and is only showing signs of continued exponential growth. \u00a0As such, there are important points that any independent contractor or company using an independent contractor should keep in mind when entering into a independent contracting relationship.<\/p>\n<\/div>\n<p>&nbsp;<\/p>\n<p><!--more--><\/p>\n<p><strong>1. \u00a0<span style=\"text-decoration: underline;\">The Independent Contractor&#8217;s Legal Entity<\/span><\/strong><\/p>\n<ul>\n<li><strong>What is it?\u00a0<\/strong>\u00a0This is a greater concern for an\u00a0independent\u00a0contractor. \u00a0See\u00a0<a title=\"Guide To Legal Entity Choice\" href=\"http:\/\/blog.upcounsel.com\/guide-to-legal-entity-choice\/\" target=\"_blank\" rel=\"noopener\">Choosing Your Legal Entity<\/a>, which\u00a0has some\u00a0special\u00a0considerations\u00a0for\u00a0independent\u00a0contractors\u00a0\u00a0on\u00a0choosing a S-Corporpation (&#8220;S-Corp&#8221;) over an LLC. \u00a0As explained by several attorneys and accountants, the tax savings as a S-Corp can be significant and are well worth some of the extra paper work.<\/li>\n<\/ul>\n<ul>\n<li><strong>When to use? <\/strong>It is generally recommended that an independent contractor<a href=\"http:\/\/www.quora.com\/Should-an-independent-consultant-freelancer-form-an-LLC-or-work-as-an-individual\" target=\"_blank\" rel=\"noopener\"> form some sort of legal entity<\/a>\u00a0vs operating as a sole\u00a0proprietor. \u00a0If anything, this makes your services appear more legitimate.<\/li>\n<\/ul>\n<ul>\n<li><strong>What to do? \u00a0<\/strong>See <a title=\"Guide to Forming a California S-Corp\" href=\"http:\/\/blog.upcounsel.com\/guide-to-forming-california-s-corp\/\" target=\"_blank\" rel=\"noopener\">Guide To Forming A California S-Corp<\/a> for step by step instructions on how to do this. \u00a0Make sure to seek out an attorney to help you with this process. \u00a0Please consult a tax advisor for full instructions on how to reap the maximum tax benefits.<\/li>\n<\/ul>\n<p><strong>2. \u00a0<span style=\"text-decoration: underline;\">Determine If An Independent Contracting Relationship Exists<\/span><\/strong><\/p>\n<ul>\n<li><strong>What is it?\u00a0<\/strong>This is more of a concern for the company using the independent contractor, as there are significant penalties for\u00a0misclassifying someone as an\u00a0independent\u00a0contractor vs an employee. \u00a0Employee audits are becoming increasingly frequent in states like California and New York, so this is no small matter &#8211; even for a startup (just ask <a href=\"http:\/\/blog.timesheets.com\/2011\/10\/10\/how-does-a-big-company-like-groupon-overlook-overtime-payments\/\" target=\"_blank\" rel=\"noopener\">Groupon who got nailed with an employee audit<\/a>\u00a0in 2010). \u00a0Also check out this video on the\u00a0<span class=\"Apple-style-span\" style=\"color: #000000;\"><a href=\"http:\/\/video.foxbusiness.com\/v\/4316672\/\" target=\"_blank\" rel=\"noopener\">Hidden Dangers of Independent Contractors<\/a>.<\/span><\/li>\n<\/ul>\n<ul>\n<li><strong>When to Use? <\/strong>Always!<\/li>\n<\/ul>\n<ul>\n<li><strong>What to do? \u00a0<\/strong>The <a href=\"http:\/\/www.irs.gov\/newsroom\/article\/0,,id=173423,00.html\" target=\"_blank\" rel=\"noopener\">IRS has laid out guidelines<\/a> for determining whether someone would be classified as an independent contractor or an employee. Silicon Valley Employment attorney\u00a0<a href=\"http:\/\/www.dorsey.com\/people\/detail.aspx?Attorney=4755&amp;mode=full\">Gary M. Gansle<\/a>\u00a0has also laid out <a href=\"http:\/\/www.mattbartus.com\/independent-contractor-or-employee-getting-it-right-is-more-important-now-than-ever-before\/\" target=\"_blank\" rel=\"noopener\">some important guidelines<\/a> for making this the independent contractor determination.<\/li>\n<\/ul>\n<p><strong>3. \u00a0<\/strong><span style=\"text-decoration: underline;\"><strong>Non-Disclosure Agreement (&#8220;NDA&#8221;)<\/strong><\/span><\/p>\n<ul>\n<li><strong>What is it? <\/strong>A non-disclosure agreement protects information which is disclosed to one or more parties. \u00a0It legally binds the receiver of information from improperly disclosing or using the information without the consent of the discloser.<\/li>\n<\/ul>\n<ul>\n<li><strong>When to use? \u00a0<\/strong>Prior to a formal consulting relationship being established. \u00a0For obvious reasons, sensitive information must pass from the company to the independent contractor in order for the contractor to create a proposal or assess a project. \u00a0An independent contractor or consulting agreement signed upon consummation of the relationship will typically contain additional confidentiality language.<\/li>\n<\/ul>\n<ul>\n<li><strong>What to do? <\/strong>Typically the consultant will sign a one-way non-disclosure agreement with the company.<\/li>\n<\/ul>\n<ul>\n<li><strong>Sample Document: <\/strong><a href=\"https:\/\/docs.google.com\/a\/upcounsel.com\/document\/d\/1rwFW3_oycUcey-lsxw7UJA8QX-wgiigncJXYtrw0444\/edit?hl=en_US\" target=\"_blank\" rel=\"noopener\">One Way\u00a0Non-Disclosure\u00a0Agreement<\/a><\/li>\n<\/ul>\n<p><strong>4. \u00a0<span style=\"text-decoration: underline;\">Consulting\/Independent Contractor Agreement<\/span><\/strong><\/p>\n<ul>\n<li><strong>What is it? <\/strong>The primary\/master agreement which manages the relationship between a company and an independent contractor. \u00a0Among other things, the agreement should establish 1) an independent contracting relationship, 2) ownership rights in any work product, and 3)\u00a0confidentiality.<\/li>\n<\/ul>\n<ul>\n<li><strong>When to use? \u00a0<\/strong>Always.<\/li>\n<\/ul>\n<ul>\n<li><strong>What to do? <\/strong>Create a Consulting Agreement. \u00a0Make sure to have your lawyer review the agreement to ensure any language that eludes to an employment relationship is left out. \u00a0Have the consultant and company sign the agreement.<\/li>\n<\/ul>\n<ul>\n<li><strong>Sample Document: <\/strong><a href=\"https:\/\/docs.google.com\/a\/upcounsel.com\/document\/d\/1rEGuv70qm6QoOkgY-iv9LloYAwy7rYb0lVk1pc2RFsM\/edit?hl=en_US\" target=\"_blank\" rel=\"noopener\">Consulting (Independent Contractor) Agreement<\/a><\/li>\n<\/ul>\n<p><strong>5. \u00a0<span style=\"text-decoration: underline;\">Statement Of Work (&#8220;SOW&#8221;)<\/span><\/strong><\/p>\n<ul>\n<li><strong>What is it? <\/strong>\u00a0The document which describes the work to be performed under the consulting relationship. \u00a0Typically, this agreement will lay out the project deliverables, milestones and payment terms. \u00a0A Statement of Work is a part of the master Consulting Agreement &#8211; most often as an attachement. \u00a0Depending on how the Consulting Agreement is written, the parties can execute numerous Statements of Work in an on going independent contractor relationship but the relationship is still governed by the original master Consulting Agreement (like the example above).<\/li>\n<\/ul>\n<ul>\n<li><strong>When to use? <\/strong>\u00a0Found in most consulting relationships.<\/li>\n<\/ul>\n<ul>\n<li><strong>What to do? <\/strong>The Statement of Work is the most negotiated piece of the consulting relationship. \u00a0Make sure to make the Statement of Work as detailed as you can to set the appropriate expectations.<\/li>\n<\/ul>\n<ul>\n<li><strong>Sample Document: <\/strong>Attachement to <a href=\"https:\/\/docs.google.com\/a\/upcounsel.com\/document\/d\/1rEGuv70qm6QoOkgY-iv9LloYAwy7rYb0lVk1pc2RFsM\/edit?hl=en_US\" target=\"_blank\" rel=\"noopener\">Consulting (Independent Contractor) Agreement<\/a>.<\/li>\n<\/ul>\n<p><strong>Some Cool Tools For Our Independent Contractors<\/strong><\/p>\n<table border=\"1\">\n<tbody>\n<tr>\n<td style=\"vertical-align: middle;\"><strong>Invoicing<\/strong><\/td>\n<td style=\"vertical-align: middle;\"><a href=\"https:\/\/upcounsel.freshbooks.com\/refer\/www\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.freshbooks.com\/images\/banners\/fb200x125-loving.png\" alt=\"FreshBooks\" width=\"150\" height=\"94\" border=\"0\" \/><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"vertical-align: middle; background: none;\"><strong>Accounting<\/strong><\/td>\n<td style=\"vertical-align: middle; background: none;\"><a href=\"http:\/\/www.kqzyfj.com\/click-1-10800559\"><img decoding=\"async\" style=\"width: 130px;\" src=\"http:\/\/www.ftjcfx.com\/image-1-10800559\" alt=\"QuickBooks\" border=\"0\" \/><\/a><\/td>\n<td style=\"vertical-align: middle; text-align: center; background: none;\"><a href=\"http:\/\/www.tkqlhce.com\/click-5573873-10895148\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.tqlkg.com\/image-5573873-10895148\" alt=\"Outright\" width=\"125\" height=\"125\" border=\"0\" \/><\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>The following is a guest post from fnBlog Contributor Matthew Faustman, founder of\u00a0UpCounsel. \u00a0Check out other great startup advice like Startup Legal Tips and Free Legal Documents at the UpCounsel &#8230; <\/p>\n<div><a href=\"https:\/\/foundersnetwork.com\/independent-contractor-guide\/\" class=\"more-link\">Read More<\/a><\/div>\n","protected":false},"author":31,"featured_media":16236,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"footnotes":""},"categories":[144],"tags":[98,90],"table_tags":[],"class_list":["post-271","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tech-startup-advice","tag-startups","tag-tech-founders"],"acf":[],"featured_image_data":{"src":"https:\/\/foundersnetwork.com\/wp-content\/uploads\/2011\/12\/Independent-Contractor.jpg","alt":"Independent Contractor","caption":"Independent Contractor"},"_links":{"self":[{"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/posts\/271","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/users\/31"}],"replies":[{"embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/comments?post=271"}],"version-history":[{"count":0,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/posts\/271\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/media\/16236"}],"wp:attachment":[{"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/media?parent=271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/categories?post=271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/tags?post=271"},{"taxonomy":"table_tags","embeddable":true,"href":"https:\/\/foundersnetwork.com\/wp-json\/wp\/v2\/table_tags?post=271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}