If your work is the result of a new business, pivot or side gig, understanding the implications of the laws that apply to your business structure is critical.
If you are a freelancer – also known as an independent contractor, subcontractor, contract worker, or gig worker, you are essentially a small business. The law will generally treat you as a business and not an employee.
Below are some national laws that apply to independent contractors. Be aware that additional state and local laws will apply for independent contractors. Research your city, state and county for guidance on required documentation to register your business properly. For more information, local and regional resources such as the Small Business Administration (SBA) , Small Business Development Center (SBDC) Network, and county offices provide a broad range of entrepreneur and small business support.
As a business owner / independent contractor, it is your responsibility to be familiar with and comply with laws and regulations. It is prudent to consult with an employment attorney to be sure you understand the legal requirements of your business structure.
Here’s what you need to know about freelancer vs employee status.
Employment law & freelancers
Freelancers are treated as a business, therefore business laws apply, and not employment law. However, there may be exceptions in some states or cities. For example, employment discrimination and gender-based harassment issues may be relevant to both independent contractors s well as employees.
Wage & hourly law
Wage and hourly laws generally do not apply to freelancers.
It is essential for freelancers to have solid contracts with their clients, vendors, and subcontractors. These spell out agreed expectations in writing and protect for both parties.
Filing & paying taxes
Independent contractors are responsibility to pay appropriate federal, state, and local taxes each year. Since your taxes are typically not withheld when you get paid, and you are responsible for tracking and paying them when due. Document all income and expenses, and retain receipts. Your clients may ask you to fill out a W9 form, which provides them the information needed to send you and the IRS a 1099 form showing how much they paid you. Whether they request that information from you or not, you must report all your income.
Sole proprietors or sole owners of an LLC are generally required to file a tax return, and make payment by mid April, and then estimated quarterly payments in June, September, and January.
LLCs with multiple owners, or corporations are generally required to file the tax return and make payment by mid March, then the individual tax return. Then make payment by mid April, and then estimated quarterly payments in June, September, and January.
Client tax forms
A client who paid you $600 or more within a calendar year is required to send you a Form 1099-MISC by the following January 31. If they don’t, you still must report the income on your taxes, and the business must file the 1099 with the IRS by Feb 28. If you have paid a sub-contractor $600 or more within a calendar year, you are required to file a Form 1099-MISC for that payment.
A client may request you complete a W-9 form. This helps them complete the IRS Form 1099-MISC to be filed. An incorporated independent contractor does not need to file the 1099.
Intellectual property & copyright
Intellectual property is any creative work, such as writing, art, design, inventions, etc. Most work done by freelancers, such as writing, art, design, etc., falls under “copyright.” If you are doing such work for a client and you have not signed over the copyright to the client, by default belongs to you.
Attorney Derek Usman specializes in Employment Law, and can advise you on all matters relating to business law, structure and conflicts.