How to Hire an Independent Contractor
Are you ready for some extra help in your business, but not sure how? This is a major milestone which is exciting but can also be a little scary–especially when legal terms start getting tossed around. All you want is for someone to help you stay organized in your business, but it can be confusing with figuring out how to hire an independent contractor the proper legal way. But don’t worry! I created a checklist for paying a 1099 independent contractor just for you, so by the end of this post you will know exactly what you need to do to move forward in hiring your very first team member!
First of all, I don’t want you to pass up the opportunity to celebrate the fact that you actually need an employee. This means you’re having consistent money coming in, you are solving people’s problems, and you are starting to grow a loyal following. Congratulations! With all the success you’re having, you’re probably ready to take off some of the hats that you wear as the boss and share them with someone else. Here’s everything you need to know about how to hire an independent contractor.
What kind of attorney would I be if this didn’t have a disclaimer? I’m a licensed attorney and I practice in Utah and Idaho. I am not your attorney. This is not official legal advice. If you have any questions, please consult with a legal professional in your jurisdiction.
How to Hire an Independent Contractor Step #1: Establish your business as an LLC.
If you’re ready to hire help, you first need to make sure your business is legally known as an LLC (limited liability company). When you first started out you may have registered your business as a sole proprietorship, but if you’re going to hire an employee(s) you need to make the switch to an LLC. You can check out my post HERE on how to make your business an LLC.
Setting up your business as an LLC gives your business more legal protection and helps make sure you’ve checked all of your boxes. This will help create a strong foundation for your business and will tremendously help as it continues to grow. You can check out my video HERE that goes more into detail about an LLC and whether or not it’s right for your business!
How to Hire an Independent Contractor Step #2: Make a list of what you want to outsource.
Oftentimes, new business owners hire someone before they have actually nailed down the job description. So, before you ever put out a listing or start talking to potential hires, do the internal work to know what you want that new employee to do for you.
This list should include things that you are bad at, hate doing, don’t have the time for, or simply aren’t happening because you are overworked. It could also include things that you may like doing, but it’s work that could be done by someone else.
Once you’ve figured out the type of work you want the new hire to do, identify what skills are needed to fulfill those tasks. These skills will become the base draft of your job description. Next, identify what training this new employee will need in order to complete your tasks. Take note of that and create some training if needed. Think about how you will pay your employee (hourly-based or project-based) and set that up. Doing these three things before ever advertising for help will make your first experience of hiring an independent contractor for your business go a lot more smoothly!
How to Hire an Independent Contractor Step #3: Classify your team member.
When I say classify your team member, I mean you need to know what type of employee he/she will be recognized as by the state and/or IRS. Will your new team member be an independent contractor or a W2 employee?
To be clear, there is either a 1099 independent contractor or a W2 employee. These terms do not mix and they mean two different things. Each one should have specific obligations and processes for how they are compensated.
It’s super important to get this classification correct in your business. If it is set up incorrectly, your business could face some backlash from your state or the IRS. I recommend watching my video at the top of this post to get more details on this. And reach out to your legal representative if you have any questions about it!
How to Hire an Independent Contractor Step #4: Find your team member.
You have lots of options here with how you find your new employee. You can look in your own network, post a job listing, or go on a marketplace like Upwork or a similar community where freelancers congregate to find work. Refer back to the notes you made on step #2 and share those with the potential hires.
How to Hire an Independent Contractor Step #5: Set up a contract.
If you hire an independent contractor, you should probably have a contract for them, right? It’s in their job title, so probably! (Yes, you definitely should.) You want to have a piece of paper with a written agreement. The contract should outline the boundaries and relationships of how you’re going to work together.
A contract should include:
- An outline of how they will be paid and any accompanying processes
- Termination (how long the two of you will be working together. Typically independent contractors have a time limit outlined in the contract and it can be renewed if you still want them working for you once the time stamp has expired.)
- A tight scope of the work they will do for you
- Rush fees/design change fees/revision fees
- Confidentiality or a non-disclosure agreement
- Non-solicitation (different than a non-compete. Be careful here. If you’re hiring an independent contractor then you’re not supposed to be controlling the manner and means of their work.)
If you have already hired several employees for your business and have yet to get anything in writing, check out my contracts HERE. They will save you and your business!
How to Hire an Independent Contractor Step #6: Have your employee fill out a W9.
A W9 is what will allow you to issue them a 1099 tax form at the beginning of the year. If you’ve paid your contractor more than $600, then they will need a 1099 from you. Having that W9 ready to go will make this whole process go a lot quicker and smoother. Your accountant will thank you!
How to Hire an Independent Contractor
I hope these 5 steps on how to hire an independent contractor were helpful to you! I am so excited for you to get more people on your team because that means your dream is getting bigger and you’re helping more people! It is super important as you’re taking this next big step in growing your business that you are doing it the legally legit way. Follow these steps when hiring your first independent contractor and then make sure to follow along with me on Instagram, so you can keep getting all the biz legal tips you need to know. You can find me @brittanyratelle!
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