As more workers are turning to non-traditional career paths freelancing as independent contractors - there are quite a few legal issues they need to plan for. If you're just getting started, or merely thinking about getting started, as a freelance professional then you should read this guide.
Independent contractors are considered self-employed and thus are responsible for self employment taxes, which is how Social Security and Medicare payroll taxes are paid. Self-employed individuals are required to report their income (non-employee compensation) on Schedule C (Form 1040) or a Schedule C-EZ (Form 1040).
Generally, individuals earning more than $400 or more through self-employment must file a Form 1040.
Legally speaking, the independent contractor who creates a computer program, written work, artwork, piece of music, photography, or other work, owns the intellectual property in the work. In other words, you could take that great product you created for XYZ company and sell, license, or publish the work. Since that would inherently defeat the purpose of them hiring you in the first place, most freelancing agreements or independent contractor agreements will spell out the details regarding who owns the intellectual property.
Independent Contractor Agreement
Always have an independent contractor agreement. This agreement is your bread and butter in terms of establishing the bounds of your working relationship. It should spell out all details of your arrangement, including:
- Payments – how much and when they are due
- Scope of work – exactly what you will do and when you will have it completed
- Rights to the work – we already discussed who owns the property, but be sure to spell out any intention you may have to use that content in promotional or marketing materials