Most businesses are working with independent contractors these days. According to research, contractors are expected to represent 40% of the working force in the next year or so.
Although this sounds exciting, there are several things you need to take into account if you are planning on hiring contractors for your company. We created a list of four must-dos to help you navigate the process.
#1 Collect a W-9 (or W8-BEN) form
A Form W-9 (Request for Taxpayer Identification Number) confirms that the person you hired is legally allowed to work in the US, if they are a US resident or citizen. Having this form is absolutely essential if you want to avoid the risk of illegally hiring labor.
If the person you are hiring is a foreign resident or citizen, you’ll need to collect a W-8-BEN form instead. On top of that, make sure they are allowed to work as a contractor in their country.
#2 Sign the contract agreement
A contract agreement signed by both parties is a part of the standard procedure. Although it's not absolutely necessary, it is highly advisable to have the contract. It simply protects both parties and removes any potential conflicts. The contract should include the project scope, compensation structure, product ownership, and intellectual property. Other similar items can be non-disclosure agreements etc..
Bare in mind, simply saying that the person you're hiring is an independent contractor and not employee will not suffice. You need to be careful when making the classification. Check out the differences between an independent contractor and an employee beforehand.