As a general matter, there are numerous factors that may be relevant in determining whether a person is deemed an outside contractor, rather than an employee of the company. For example, it may be helpful to demonstrate that the contractor: (i ) works at his or her own facilities; (ii) does not require training from the company to perform the required services; (iii) maintains the authority to control how the work is performed; and (iv) has been retained for a specific project rather than on a long-term basis. It may also be helpful to establish that the contractor provides services to entities other than the company, and is paid a flat fee, rather than an hourly wage, for the services performed for the company.
We find that many of our consultant customers enter into agreements with contractors that explicitly state that the contractor is an independent, outside contractor, and that the contractor (and not the company) shall be obligated to pay all payroll and related taxes relating to services provided to the company by the contractor.
In addition, we understand that some of our customers attempt to ensure that their contractors will be considered independent contractors, and not employees of the company, by requiring the contractors to be incorporated or organized as a limited liability company, and also requiring that the contractors actually employ the individuals performing the services. If a contractor is a corporation or a limited liability company with its own employees, it may be more likely that its workers will be considered the contractor's employees and not the company's employees.
Even after taking the above steps, if a company too closely supervises or controls the work done by its contractor, the contractor (or the contractor's employees) may be deemed to be the company's employees.
If contractors that you are using are not incorporated, you may refer the contractor to The Company Corporation to help them incorporate or form a limited liability. To learn more about partnership opportunities with The Company Corporation, click here.