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Getting ready to hire a freelancer or contractor? Before any work begins, it’s standard practice to have a clear independent contractor agreement in place. This simple document defines what work will be done, how payment works, and what both sides are responsible for.
Without one, even small projects can turn confusing fast, especially when expectations or deadlines aren’t aligned.
Whether you’re a business owner bringing in a new person or you’re the contractor taking on new work, having everything in writing protects both sides and keeps the relationship professional from day one.
An independent contractor agreement is a simple contract between a service provider and a client that spells out the work being done, how much will be paid, and what both sides are responsible for.
It’s meant for situations where the person doing the work isn’t an employee but an independent contractor running their own business.
You’ll often see these agreements used in roles such as:
This agreement helps define the independent contractor relationship clearly. It shows that the contractor has control over how they provide services and when the work gets done, unlike an employer-employee relationship, where the company sets the rules.
It’s also a form of legal protection for both sides. The client knows what to expect, and the contractor has proof of what was agreed upon.
At the very least, a good independent contractor agreement should be clear, detailed, and easy to understand.
Here are some essential elements:
This section defines exactly what the contractor is hired to do. It should outline the following services being provided, how they’ll be delivered, and what the final outcome should look like.
For example, a marketing consultant might include “social media strategy, campaign setup, and performance reporting.” Being specific helps avoid confusion about what’s included and what’s not.
This part covers how and when payments will be made. It should explain the payment schedule (weekly, monthly, or after milestones) and the total amount owed. Some contracts also include late payment penalties or specify acceptable payment methods.
Here’s what this section often includes:
Having these details in writing makes sure both parties know exactly how money will move and when. In turn, parties can avoid confusion once the work begins.
Who owns the work once it’s done? This section states whether the client or contractor holds the rights to any intellectual property created.
In most cases, the client owns the finished product once payment is complete, but it’s best to clarify that in writing.
When contractors handle confidential information or trade secrets, this section is key. It often works like a built-in non-disclosure agreement, which prevents either party from sharing sensitive business details with outsiders.
Many contracts also mention how long this confidentiality lasts, even after the project ends.
The indemnification clause explains how each party will handle damages, losses, or claims that could come up during the project.
Contractors are usually solely responsible for their own work and must carry liability insurance to cover accidents, mistakes, or delays. This section keeps both sides protected from unexpected costs or legal issues that might happen while the work is being done.
For example, if a contractor damages company property or fails to meet safety standards during a project, the indemnification clause makes it clear that they’re responsible for covering those costs, not the client.
This section clarifies that the contractor is solely responsible for their tax obligations, including employment taxes, and does not receive other employee benefits like health insurance or paid leave.
It reinforces that the agreement constitutes a legal contract between two independent entities, not an employment arrangement.
Every contract should explain how it can end. The termination clause lists reasons either party may cancel the agreement, such as failure to perform or missed payments.
Some contracts require prior written consent or a notice period before ending the relationship. This keeps things fair and professional.
The entire agreement clause confirms that the written contract represents everything both parties agreed to; no side deals or unspoken promises count.
If any changes are needed, they must be made with prior written consent from both sides. Doing so keeps the document legally binding and easy to enforce.
Finally, the agreement should make it clear that the contractor runs their own business operations. They choose how to perform such services, provide their own tools, and control their schedule.
This section reinforces that the contractor is an independent business, not under the client’s daily supervision.
There are about 59 million Americans working as independent contractors, collectively earning around $1.2 trillion annually. This group has grown rapidly, with 3 in 10 full-time workers shifting to freelance or contract work around 2020, and it continues to expand today.
As more professionals move toward flexible, project-based work, having a clear written agreement between the self-employed worker and the other party is absolutely necessary. Here are more specific reasons why:
A contract makes sure everyone knows what’s expected. It lists the services provided, payment details, and project deadlines so neither side can claim confusion later.
For instance, if a designer delivers work that differs from what the client imagined, the agreement acts as a record of what the parties agreed to at the start.
The Internal Revenue Service (IRS) treats independent contractors differently from employees, which makes proper classification extremely important.
According to the IRS, a person is generally considered an independent contractor if the payer has the right to control or direct only the result of the work and not how or what will be done to achieve it.
A detailed agreement helps ensure compliance by showing that the contractor is an independent professional responsible for their own tax obligations and not entitled to employment benefits.
It also protects other businesses from IRS penalties for worker misclassification or payroll mistakes. By clearly outlining roles and responsibilities in writing, both sides can prove that the business relationship meets federal tax standards and complies with labor laws.
Each industry has its own norms for performance, deliverables, and deadlines. Including those industry standards in the contract makes expectations clear.
It also outlines that the contractor is responsible for performing services using their own methods and tools, reinforcing independence from the client’s control.
If a subsequent breach occurs, such as missed payments, poor-quality work, or delayed delivery, the agreement acts as proof in court or arbitration.
It specifies how disputes will be handled, the governing law that applies, and what steps each party must take before pursuing legal action. This keeps disagreements from escalating into costly legal battles.
A well-written agreement builds trust. When both sides know their rights and responsibilities, it sets the stage for smooth collaboration and repeat work.
Moreover, contractors can show professionalism when pitching to other businesses, while clients can confidently hire knowing there’s a fair, protective framework in place for both.
Writing an independent contractor agreement might sound complex, but it’s mostly about putting expectations into writing. Here’s a simple step-by-step guide to help you draft one that protects both you and the contractor.
State who’s who, and that the contractor is engaged in a professional capacity as an independent contractor (not an employee).
Sample clause:
“Parties. This Independent Contractor Agreement (“Agreement”) is between [business owner/company legal name] (“Company”) and [contractor legal name] (“Contractor”). Contractor is engaged in a professional capacity as an independent contractor, not as an employee, partner, or agent.”
Spell out the contractor’s work, deliverables, milestones, and quality standards. Link to a Statement of Work (SOW) if it’s long.
Sample clause:
“Services. Contractor will perform the services described in Exhibit A (detailed description of services), including deliverables, acceptance criteria, and timelines.”
Say when it starts and ends (or that it’s ongoing), and how either side can end it.
Sample clause:
“Term. This Agreement begins on [date] and continues [until completion/month-to-month], unless terminated earlier as provided below.”
Be specific about flat fee or lump sum fee, hourly rate, expenses, due dates, and invoicing.
Sample clause:
“Compensation. Company will pay Contractor [a flat fee of $X / a lump sum fee of $X/$X per hour]. Contractor will invoice [monthly/upon milestone completion]. Payment is due [net 15/30].”
Say which expenses incurred are reimbursable and what pre-approval looks like.
Sample clause:
“Expenses. Company will reimburse reasonable, pre-approved work-related expenses with receipts submitted within [X] days of incurrence.”
Protect confidential data and clarify IP ownership (work-made-for-hire or license-back if appropriate).
Sample clause:
“Proprietary Information & IP. All deliverables are Company’s sole property upon payment. Contractor assigns all intellectual property rights therein to Company. Contractor will keep proprietary information confidential and use it only to perform this Agreement.”
Say the contractor handles their own taxes and Social Security, and that employee benefits don’t apply.
Sample clause:
“Independent Status. Contractor is solely responsible for all taxes, Social Security, and other withholdings. Contractor is not eligible for employee benefits, including vacation pay, sick leave, or retirement benefits.”
State that the contractor controls the method, manner, and means.
Sample clause:
“Method of Work. Contractor decides the method, manner, and means of performing services and provides their own tools, equipment, and workspace.”
If you include a non-compete agreement, keep the scope reasonable (time, geography, and type of work). Many places restrict these, so check relevant laws first.
Sample clause:
“Restricted Covenant. For [X months] after this Agreement ends, Contractor will not solicit Company’s clients identified in Exhibit B for services substantially similar to those provided here.”
Tip: Some jurisdictions limit or ban non-competes. If you use one, consider a narrower non-solicitation clause instead.
Have the contractor promise original work that meets the SOW’s specs.
Sample clause:
“Warranties. Contractor warrants that deliverables are original, free of liens, and will conform to the Detailed Description of Services in Exhibit A.”
Say both sides will comply with applicable law, and the contractor will follow the licenses/permits needed to work in a professional capacity.
Sample clause:
“Compliance. Each party will comply with all applicable laws and regulations. Contractor will maintain all licenses and permits required to perform the Services.”
Protect the company from third-party claims caused by the contractor; add a cap if appropriate.
Sample clause:
“Indemnification. Contractor will indemnify Company for third-party claims arising from Contractor’s negligence, willful misconduct, or breach. Limitation of Liability. Neither party is liable for indirect damages.”
Give a simple out clause and a fast track for serious breach.
Sample clause:
“Termination. Either party may terminate for any reason upon [X] days' written notice. For material breach, the non-breaching party may terminate immediately if the breach is not cured within [X] days after notice. This is an earlier termination for cause.”
Tell people where and how to send formal notices; certified mail with return receipt requested is common.
Sample clause:
“Notices. Notices must be in writing and delivered to the addresses below via certified mail, return receipt requested, nationally recognized courier, or email with confirmation.”
Pick the jurisdiction’s laws and venue. Use a place connected to the work or your company.
Sample clause:
“Governing Law; Venue. This Agreement is governed by the laws of [state/country] (without regard to conflicts rules). Any dispute will be brought in the courts located in [county/state].”
Make it clear that this is not a partnership or joint venture, and changes must be in writing, signed by both you and the contractor.
Sample clause:
“Miscellaneous. Nothing here creates a partnership, agency, or joint venture. This is the entire agreement. Any amendment must be in writing, signed by both parties.”
Include names, titles, and dates for one party and the other. Most people use e-signature software to make this step easier, especially when working virtually.
If you’re operating in multiple states/countries, using restrictive covenants, handling sensitive data, or paying high fees, have legal counsel review your draft. That small step can save you far more than the cost of the review.
Copy and paste, then fill in the blanks. Keep (and expand) Exhibits for the detailed description and client list.
Independent Contractor Agreement
1. Parties. This Agreement is between [company legal name], a [state] [entity type] (“Company”), and [contractor legal name] (“Contractor”), engaged in a professional capacity as an independent contractor.
2. Services. Contractor will perform the services in Exhibit A (detailed description of services), including deliverables, milestones, and acceptance criteria.
3. Term. Starts [date] and continues [until completion / month-to-month], unless terminated earlier as stated below.
4. Compensation. Company will pay [flat fee/lump sum fee/hourly rate] as detailed in Exhibit A. Contractor will invoice [schedule]; payment due [net 15/30].
5. Expenses. Company reimburses pre-approved work-related expenses with receipts submitted within [X] days.
6. IP & Proprietary Information. Upon payment, all deliverables are Company property. Contractor assigns IP rights and will keep proprietary information confidential.
7. Independent Status; Taxes/Benefits. Contractor is responsible for taxes and Social Security. No employee benefits, including vacation pay.
8. Compliance. Each party complies with applicable law and industry standards. Contractor maintains required licenses/permits.
9. Restricted Covenant (optional). Contractor agrees to the non-solicitation/non-compete terms in Exhibit B (subject to relevant laws).
10. Warranties. Deliverables are original and conform to Exhibit A.
11. Indemnity; Liability. Contractor indemnifies Company for third-party claims arising from Contractor’s breach or negligence. No liability for indirect damages.
12. Termination. Either party may terminate on [X] days' written notice; for material breach, termination after [X] days’ cure. This is an earlier termination for cause.
13. Notices. Notices to the addresses below by certified mail, courier, or confirmed email.
14. Governing Law; Venue. This Agreement is governed by [jurisdiction’s laws]; exclusive venue in [courts/location].
15. Miscellaneous. No agency, partnership, or joint venture is created. Entire Agreement. Amendments must be in writing, signed by both you and the other party.
Signatures
Company: __________________ Name/Title: __________ Date: ____
Contractor: ________________ Name/Title: __________ Date: ____
Exhibit A — Detailed Description of Services, Deliverables, Timeline, Fees
Exhibit B — Client/Account List for Non-Solicitation (if used)
An independent contractor agreement and an employment agreement might look similar at first, but they serve very different purposes.
An independent contractor agreement is a legal document used when hiring someone for a specific project or a limited scope of work.
For example, a graphic designer hired to create a company logo or a marketing consultant brought in for a six-month campaign would sign an independent contractor agreement.
An employment agreement, on the other hand, applies when hiring a long-term employee who becomes part of your business operations.
This type of contract typically includes benefits like vacation pay, health insurance, and retirement contributions. It also gives the employer more control over how, when, and where the work is done.
For instance, a full-time marketing manager working regular hours at your office would sign an employment agreement.
The main difference lies in control and independence. Contractors decide how to complete the job, while employees follow company policies and schedules.
Contract lifecycle management software can save you time, money, and confusion when managing contracts, agreements, or compliance. But knowing when to use them depends on what you’re handling.
If you’re running a small business or hiring independent contractors, using the right tools or professionals can make the process smoother and more secure.
You should consider using legal software or services when:
Using the right mix of legal software and professional advice keeps your contracts accurate, enforceable, and easy to manage.
Independent contractor agreements only work well when they’re clear, compliant, and easy to track. That’s exactly what Aline delivers. It brings every step (drafting, reviewing, approving, and storing) into one organized platform so nothing gets overlooked.
Aline’s AI reviews contract language, highlights key dates, and keeps your documents structured and searchable. It helps businesses handle legal workflows confidently, from one-time contractor agreements to ongoing partnerships.
The platform also simplifies collaboration, which makes it easy for teams to review and approve contracts without delays or confusion.
Aline turns contract management from a manual task into a smooth, dependable process. Start your free trial today!
An independent contractor agreement is a legal document that defines the relationship between a business owner and a contractor. It outlines the project scope, payment terms, responsibilities, and legal protections for both parties, ensuring compliance with relevant laws.
Yes, you can draft your own agreement using a template as a starting point. However, it’s best to have legal counsel review it to make sure it follows applicable law, includes required clauses, and protects both you and the contractor.
The U.S. Department of Labor updated its rule to clarify how to determine if a worker is an employee or an independent contractor under the Fair Labor Standards Act. It focuses on factors like control, opportunity for profit or loss, and the nature of the work relationship.
Breaking an agreement can lead to legal and financial consequences. Depending on the clause violated, one party may owe damages, lose payment, or face termination under the contract’s terms for earlier termination or breach.
Brent is an attorney, a full-stack JavaScript engineer and the CEO of Aline.
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