This template is for small business owners who aren’t ready to hire full-time employees just yet. Instead, they are looking to delegate some of their work tasks to independent contractors, which can be cheaper than paying the salary of an employee.
You may be asking yourself, “What IS the difference between independent contractors and employees?”
The two biggest differences are (1) the way taxes are paid for and (2) the degree of control that the employer has over the contractor.
(1) TAXES. For the employee, the company withholds income tax, Social Security, and Medicare from wages paid. For the independent contractor, the company does not withhold taxes. Employment and labor laws also do not apply to independent contractors.
(2) DEGREE OF CONTROL. An employee works directly for a company or another person and answers to an employer/manager. An independent contractor may work for a company or another person (or multiple companies/people) and accept direction, but this worker ultimately has more control over the work he or she accepts and how, when, and where it is produced.
An Independent Contractor Contract is vital as a written contract describing the relationship the parties intended to create can be used as evidence to prove to the IRS that you intended to hire an independent contractor rather than an employee if you get audited.