Going Rogue:

In Accounting & Finances, Business, Taxes on May 11, 2011 by Sufen Wang Tagged: , , , , , ,

The Risks and Responsibilities of Hiring Independent Contractors


America: it’s the land of the free and the home of the brave. We Americans pride ourselves on our independence, and, now, with the economy still slowly making its way towards recovery, more businesses are hiring independent contractors than ever, and more people are working as independent contractors than ever.

I recently came across this article by Ronda Jones of Forrest T. Jones & Company. It’s all about what you need to know before you hire an independent contractor or accept work as an independent contractor. It’s a helpful article, and if you’re thinking about hiring an independent contractor, you should definitely give it a read. But here are some tidbits to whet your appetite.

If you’re thinking about hiring an independent contractor:

    • Consult an attorney and draw up a basic work contract. Make sure that it includes a “hold harmless” clause, a non-competition clause, and insurance clauses, and make sure that it addresses jurisdictional issues in your city and state.
    • Make sure that the independent contractor has adequate insurance to cover their work.
    • Consult your insurance agent to see how hiring an independent contractor will affect your coverage.
    • Request and retain invoices from your contractor.
    • You may also want to run a background check or even run an internet search to make sure that there aren’t any unpleasant surprises in store for you.
    • Make sure that you know how to issue Form 1099-MISC at the end of each tax year for your contractor.

If you are working as an independent contractor:

  • Review the company’s independent work contract. You may want to have your attorney go over it to make sure that it’s okay to sign. Make sure that you are only held accountable for liabilities resulting from gross negligence or willful misconduct. You may also want to insert a liability limitation cap so that you aren’t still held liable for errors or omissions that are discovered years down the line.
  • Ask the employer for copies of their certificates of insurance so that you can make sure that they have general liability and auto liability insurance, if applicable. You should also ask to be listed under their professional liability or errors & omissions insurance, if applicable.
  • Keep a log of the projects you’ve worked on, just in case your involvement is ever called into question.

Ask the contractor periodically to meet and review the terms of the contract to make sure that it adequately covers the work that you’re actually being required to do.Working with an independent contractor is a great way to save money for services you need, compared to hiring someone full-time that you don’t really need full-time. Working as an independent contractor is a great way to get work during times when work is difficult to find.

And if you go about it the right way, then neither party will have to hire Chuck Norris to take out the other.

  • On the Money,
    Sufen Wang
    Wang Solutions

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