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An independent contractor is any person who, in pursuit of an independent business, undertakes to do a specific piece of work for another person or entity, using his or her own means and methods, without submitting to the control of anyone else in the details of that work.
Independent contractors are sometimes called consultants, freelancers, self-employed, and even entrepreneurs and business owners. Unlike an employee who works for one employer, independent contractors typically work for a number of different clients, tackling particular jobs or projects that require special expertise.
Licenses and Permits
Before you start a business as an independent contractor, you will want to obtain the professional licenses and permits that are required for your profession. For example you may need a business license, a CPA license, contractor’s license and so forth. Contact a professional organization for your field of work to determine what licenses and permits are required, or you can contact your city hall for information about professional licenses and permits required in your city or county.
Whether or not you need a business license to work as an independent contractor depends on where you work and what kind of work you do. Many cities and counties require every business to get a general license, even a one-person, home-based operation. This license is sometimes called a business license, sometimes called a tax registration certificate. A business license is essentially a receipt for the tax you must pay to the city for the privilege of doing business in the city. Usually, you just have to pay a fee to get this type of license. Some cities don’t impose license requirements at all, or exempt very small businesses.
Depending on your trade, you may also have to get a professional or vocational license. For instance, some states license auto mechanics, barbers, massage therapists and real estate agents. Ask your trade association or go to your state government’s Web site to see if you need a particular license. If you’re not sure about who to call, your local chamber of commerce may be able to help you.
You may want to check your local zoning laws to make sure that home businesses are allowed where you live before you apply for a local business license. If your city or county bars home businesses and enforces the ban, you could get into trouble when you apply for a license. You’ll have to provide your business address to get the license, and your city and county may check first to see whether the area is zoned for business.
Skipping the License Requirement
If your local government discovers that you’re running an unlicensed business, it may fine you and prohibit you from continuing your business until you get a license. Business licenses are inexpensive, usually only $30-$50, but the penalties for operating without a license can be in the hundreds of dollars. In addition, in some locales it is a misdemeanor to violate the city ordinances by operating without a business license.
Hiring an Independent Contractor
If you are hiring an independent contractor to do work for you, make sure he or she has all the required business permits, certificates and licenses needed to perform the work.