1099 Contractor

Jump to Section

Need help with a legal contract?

CREATE A FREE PROJECT POSTING
Post Project Now

1099 contractors are a vastly important part of today’s workforce. From the gig economy to specialized services, they offer something that traditional companies and employees cannot provide. However, there are very specific laws surrounding 1099 contractors that both companies and individuals should understand.

In this post, we have described everything that you want to know about 1099 contracting, including how to become a contractor and other considerations:

What is a 1099 Contractor?

A 1099 contractor, also called an independent contractor , is a term used to describe self-employed people who require a company to issue a Form 1099-MISC. They are an entity contracted with a company as a non-employee, which is different from the treatment of employees.

1099 contractors must remain free from managerial control and direction throughout the course of the project. They must also have complete and total say over when and where they work. Companies that violate these rights can face employment law disputes by aggrieved parties.

Here is an article that defines independent contractors vs. employees.

How to Become a 1099 Contractor

It’s a fairly straightforward process for becoming a 1099 contractor. However, they are much different from traditional types of employment that go beyond the absence of guaranteed employment benefits. Always perform your due diligence when engaging in a new legal endeavor.

Here are three steps that you should take when becoming a 1099 contractor:

Step 1. Choose a Business Name and Structure

Don’t go out and buy business cards and stationery until you’ve decided on a business name. First, make sure that another business isn’t using your name. If your business name differs from the name of your company, you may need to file a tradename or “ doing business as ” form with your state.

You’ll also need to file your business with the state. Common 1099 contractor business structures include:

Once you have a business name and the required certificates, you can obtain a business location and start creating marketing and promotion materials you’ll need, such as a website, business cards, and advertising brochures. You can utilize a business plan to help you devise your strategy or gain capital funding, if necessary.

Step 2. Open a checking account for your business.

Getting a business checking account will make it clear to the IRS that you and your company are distinct entities. Once you have a business checking account, you can deposit funds as an investment and begin paying for all items you’ll need to get your business up and running. You can also use a business checking account to apply for credit and more.

Of course, you can put money into your business bank account to cover startup costs if you have money coming in. It’s best to use a business account rather than a personal account to avoid intertwining payments and income. You never know what issues can arise in the future so try to keep things separate.

Step 3. Create an easy-to-use business record-keeping system.

Gather the information you’ll need to prove your right to take legitimate business deductions. Keeping track of your business income and expenses will help you understand how well your company is performing, and you will be able to deduct those expenses from your income at tax time.

Make a simple budget to see how much money you’ll need to get started. Then, you can tell how your business is doing by reviewing and preparing your business financial statements each month, including a profit and loss statement and a balance sheet. Monitoring your financial performance routinely can result in greater profitability and fewer errors.

Step 4. Create Your Independent Contractor Agreements

An independent contractor agreement is central to managing your relationships with other businesses. Work with contract or employment lawyers to help you draft the proper agreements. They can also assist you in your venture, including setting up a sole proprietorship or LLC and navigate state-specific laws, such as for a California independent contractor .

1099 Contractors vs. Employees

The primary difference between independent contractors vs. employees is control. If the employer dictates all terms and does so consistently over time, the person is most likely an employee.

Employees also receive a regular wage, receive employee benefits, have taxes deducted from their salaries, and the employer dictates their work and schedule. Full-time employees generally receive additional benefits, such as severance pay , workers’ compensation, and anti-discrimination protections. Employees are required to pay payroll taxes on their salaries.

Independent contractors are the polar opposite of employees. They are more likely to be paid for projects, pay their own taxes, and work when and where they want. The IRS considers them self-employed for tax purposes, which means they must pay self-employment tax.

Do 1099 Contractors Pay Taxes?

Yes, 1099 contractors pay taxes. They pay a self-employment tax on earnings of $400 or more. A legal or tax professional can help you learn more about how 1099 contractors pay taxes according to your specific situation.

Meet some lawyers on our platform

Donya G.

31 projects on CC
View Profile

Michael B.

2 projects on CC
View Profile

Paul S.

5 projects on CC
View Profile

Jeremiah C.

11 projects on CC
View Profile

Examples of Independent Contractors

The ability to retain control over how the work and payment methodologies are critical characteristics of an independent contractor. There are of industries that allow you to work as an independent contractor.

Here are a few examples of independent contractors below:

Writers

This example involves a 1099 independent contractor writer who offers services to companies online:

  • Jennifer is a web content writer
  • She helps other businesses write copy for their website and social media
  • She also offers SEO services long-term
  • Jennifer operates as a sole-proprietor
  • She doesn’t have a separate legal entity set up in her name
  • Instead, she pays all taxes on earnings and works with clients on a contracts
  • Jennifer doesn’t get unique tax advantages
  • Jennifer is still operating her business properly as a 1099 independent contractor

Lawn Care Companies

This example involves a 1099 independent contractor lawn care company that offers services to companies locally:

  • Lawn & Order is a lawn care company
  • The company was formed by two brothers who share a passion for grass and trees
  • They both want to maintain independent contractor status
  • However, they also want to become bonafide partners
  • The brothers decide to former a partnership and offer their services as independent contractors to local businesses
  • Lawn & Order uses service agreements to manage client relationships
  • The brothers equally share profits and debts with each other

Logo Design

This example involves a 1099 independent contractor logo designer who offers services to companies online:

  • Chester is a logo designer
  • He used to work for a company before going out on his own
  • Chester forms an LLC to avoid personal tax liabilities
  • Chester pays taxes according to the LLC provisions from the IRS

Regardless of how you structure your company, you may qualify as an independent contractor. If you work as a sole proprietor, form a limited liability company, or form a corporation, you may be considered an independent contractor. You can become an independent contractor as long as you are not under an employee classification.

If you have questions about being a 1099 contractor, you should always speak with contract lawyers. From the business formation to the appropriate agreements, they can guide you through every legal endeavor. Your legal team will also ensure that your company stays healthy over the long term.

Get Help Becoming a 1099 Contractor

Do you want to start your own business as a 1099 contractor?

Post a project in ContractsCounsel’s marketplace to get advice from lawyers on how to structure your business and what documents you need to draft to make sure you are legally protected. All lawyers in our marketplace are vetted by our team and peer-reviewed by other customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

ContractsCounsel verified
Attorney
18 years practicing
Free Consultation

I am a New Jersey licensed attorney and I have been in practice for over seventeen years. My practice mainly consists of representing public entities (municipalities, school boards, etc) and businesses, both small and large. In that capacity, much of work consists of drafting, reviewing and revising contracts.

ContractsCounsel verified
Lead Attorney
9 years practicing
Free Consultation

Jennifer is an experienced business law attorney who has worked with many startups as well as established corporations. With a strong background in contract creation and review, she will be able to ensure you and your business interests are always protected.

ContractsCounsel verified
Partner
21 years practicing
Free Consultation

I am a corporate lawyer with expertise working with small businesses, venture capital and healthcare. Previously, I worked at large law firms, as well as head attorney for companies. I graduated from Harvard College and University of Pennsylvania Law School. I speak 5 languages (Spanish, French, Italian and Russian, plus English), visited over 60 countries, and used to compete in salsa dancing!

ContractsCounsel verified
Founder, Branch Legal LLC
9 years practicing
Free Consultation

Legal services cost too much, and are often of low quality. I have devoted my law practice to providing the best work at the most affordable price—in everything from defending small businesses against patent trolls to advising multinational corporations on regulatory compliance to steering couples through a divorce.

ContractsCounsel verified
Attorney
3 years practicing
Free Consultation

I am a licensed attorney and a member of the California Bar. I graduated from the University of Dayton School of Law's Program in Law and Technology. I love IP, tech transfers, licensing, and how the internet and developing technology is changing the legal landscape. I've interned at both corporations and boutique firms, and I've taken extensive specialized classes in intellectual property and technology law.

ContractsCounsel verified
Partner
25 years practicing
Free Consultation

Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.

ContractsCounsel verified
Attorney and Contract Guru
16 years practicing
Free Consultation

I am an unabashed contract law geek with a passion for delivering contracts that protect your business within your risk tolerance. Contracts should be clear, concise, and able to be understood by the end user. I promote Plain English contract drafting. I also pay close attention to the boilerplate traps that trip up many agreements. Some of my most frequent drafting projects are entity operating and shareholder agreements, bylaws, asset purchase agreements, commercial leases, EULA, Terms of Service, Privacy Policies, Confidentiality agreements, employment agreements, and more.

ContractsCounsel verified
Self-Employed Legal Consultant
7 years practicing
Free Consultation

I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.

ContractsCounsel verified
Attorney at law
20 years practicing
Free Consultation

Texas licensed attorney specializing for 20 years in Business and Contract law. My services include General Business Law Advisement; Contract Review and Drafting; Legal Research and Writing, including Motion Practice; Business Formation; Article or Instructive Writing; and more. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.

ContractsCounsel verified
Partner / Attorney at Law
13 years practicing
Free Consultation

Creative, results driven business & technology executive with 24 years of experience (13+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. My engagements often include legal consultation & advisory roles, drafting of NDAs, TOS & Privacy Policies, contracts and corporate law, business strategy advice & consulting, in-house counsel, Founder & entrepreneur guidance and other roles as needed by my clients. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.

ContractsCounsel verified
Managing Partner
23 years practicing
Free Consultation

Seasoned technology lawyer with 22+ years of experience working with the hottest start-ups through IPO and Fortune 50. My focus is primarily technology transactions with an emphasis on SaaS and Privacy, but I also provide GC services for more active clients.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call