Working from a home-based business can feel a bit ambiguous in terms of understanding what your relationship is to the other businesses and clients you work with and for. The term “independent contractor” is a term used to legally describe a relationship where an individual is hired by a business or organization to do a specific job on a consultant or “outside” basis. They are not an employee. Read on to find out more about the difference between an independent contractor and a regular or seasonal employee:
An independent contractor may come on site and work for a client, work with other employees at the business or organization, and be a part of the organization and growth plan for a client–and this can make it confusing as to whether the independent contractor is working for themselves or for the company. If an individual only has one full time client and is performing all the duties of an employee, he or she SHOULD be an employee and is not really an independent contractor. As an independent contractor, you will have a contracted agreement with a client (usually with time parameters) and the specifics of your job will be detailed. You should also have more independence than a regular employee.
Since no taxes need to be withheld or benefits paid to an independent contractor, a business may try to staff their organization using “independent contractors” instead of regular employees. If you are treated like an employee and your job tasks look as though you are part of the regular staff, chances are you should be an employee and not an independent contractor. The IRS and other governmental agencies have gotten wise to this misuse and have tests they can (and do) apply to see if an individual qualifies as an independent contractor or should be an employee. An account or financial consultant can help determine the specifics and advise whether your working relationship is established as “independent contractor.”
If you are running your own business as an independent contractor, make sure you have written contracts with your clients. You can set definite boundaries to make sure that you are not just a glorified (and underpaid) employee. Seek the consultation of a specialist to make sure that you are not getting stuck in a fuzzy grey area and that all the relationships are well defined and appropriate.