5 Rights of Independent Contractors

It is important to understand your rights and how to protect your interests when you run your own business. As an independent contractor, you dictate when, where, and how you work. You can perform work for multiple clients, and have expertise in your particular industry.

Some clients you work with will be familiar with independent contractor rights and have specific engagement programs in place. Others may not have a thorough understanding of the differences between independent contractors and employees. In either case, it is good to have an awareness of your rights to make sure your client is following the law.

1. Ensure a Business-To-Business Relationship

As an independent contractor, you’ve built your business around services you provide. You have a business name, and may be a sole proprietor or have an incorporated business. It is within your rights to perform work for multiple clients.

The clients you work with should treat your relationship as a business-to-business relationship. You are not a temporary employee they are hiring. Treating you as such can put them at risk for worker misclassification.

2. Maintain Control Over Your Work

It is up to you to determine when, where, and how you do your job—not your client. Unless otherwise dictated in a contract, these are all fundamental aspects to working as an independent contractor. If a client tries to control how, when, or where you do your work, they risk treating you as an employee.

Remember, you also have the right to market your services to other businesses. Even if you have a long-term contract with a client, you are free to work on other projects or even hire other workers to help complete work.

Check out: 5 Big Benefits to Developing Partnerships with Other Consultants

3. Define Work with a Contract

A contract provides legal protection and is a legally enforceable way to define the terms of your project with a client. A contract also is a great opportunity to start a good working relationship. In a contract, you can define your independent contractor status to declare your relationship with your client as that of a consultant and contractor. Writing a contract with a client is also a great time to discuss communication, deadlines, and deliverables for a project.

Check out: Do I Need an Independent Contractor Agreement for Consulting?

4. Properly Manage Your Business

There are many responsibilities that come hand-in-hand with running your own business. From a tax perspective, you are required to pay self-employment (SE) tax, which includes both the employer and employee halves of Social Security and Medicare (FICA). When a client pays you, that amount will not have taxes taken out of it. It is up to you to set that money aside and file your taxes quarterly.

Other back office taxes you will need to take into account include filing paperwork, tracking expenses, and billing clients.

Check out: What Tax Forms You Need as an Independent Contractor

5. Understand the Benefits You are Entitled To

As an independent contractor, your client is not responsible for providing benefits such as insurance, pension plans, paid vacation, sick days, or disability insurance. Getting these personal benefits in order will be helpful to establish a stable base on which to build your business.

It is also important to protect your business against the risk of liability losses. Many clients will require you to have some sort of general liability insurance. You may also consider errors and omissions insurance and home-based business insurance. Although insurance may seem like an added expense, it is generally worth having if an issue like a contract dispute arises. Remember, you are responsible for ensuring the legal and financial wellbeing of your company. Be sure to talk to a professional about obtaining the right insurance coverage for your business.

Check out: Common Small Business Insurance Requirements, Coverages, and Exclusions

The information provided in the MBO Blog does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs. Before acting on any information in the MBO Blog you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing.