Employer Resources

Can I Hire Independent Contractors as a Sole Proprietor?

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Any growing business eventually comes to a point when it needs to hire additional help to sustain or expand its operation. Of course, one way to go is to hire employees for long-term jobs. But sometimes, there are small or short-term tasks that need to be ticked off immediately that don’t warrant employing someone full-time. In situations like these, a sole proprietor or small business can hire independent contractors to do the job.

What Is a Sole Proprietor?

A sole proprietorship is the default business structure of a small business that hasn’t been registered to the state as any other type of business entity, such as a partnership, limited liability company (LLC), or corporation. Although, you can register yourself as a sole proprietor if necessary. This process involves a single person who owns and operates a business, usually under their own legal name.

A sole proprietor’s personal and business assets and liabilities are not separated, so there is no distinction between their personal and business finances. That means that if a sole proprietor goes into debt, creditors can dip into the personal funds and assets of the small business owner.

What Is an Independent Contractor?

An independent contractor (or freelancer) is a self-employed individual hired by businesses (including sole proprietors) to provide services—but not as an employee. Instead, an independent contractor works under the terms of a contract, which is defined on a per-task or per-project basis. In most cases, this freedom allows them to work multiple jobs at the same time.

Unlike employees, independent contractors aren’t bound by company rules and expectations. They often have more freedom to do their work as they please, as long as they deliver the discussed deliverables in the agreed timeline. That said, independent contractors don’t receive the same benefits and tax reliefs as employees. Instead, they are responsible for their income and self-employment tax obligations.

Why Hire Independent Contractors?

Building a team is one of the most important skills for starting a business. But that doesn’t necessarily mean creating permanent roles in a workspace. It’s about hiring the best people to propel your business forward—and independent contractors might just fit the bill.

Hiring independent contractors can be a brilliant choice for sole proprietors who don’t need to employ full-time employees. Freelance professionals can solve immediate issues without troubling owners with the financial and legal obligations usually attached to full-time employment.

Here are some advantages of hiring independent contractors:

Professional Services

You can find independent contractors all over the world. That means you can expand your talent pool to include the best professionals from other countries, which can be advantageous depending on the specific aspect of the business you wish to improve.

Financial Savings

Independent contractors don’t expect the same benefits as full-time employees, which means sole proprietors can save on finances that would’ve otherwise gone to health insurance, a retirement fund, etc. Plus, depending on who (and from where) you’re hiring, the compensation for freelancers might be cheaper than what you’d pay for a full-time hire.

Additionally, since independent contractors are responsible for their own taxes, sole proprietors are free from paying additional tax obligations when giving salaries.

Flexibility

Sole proprietors have no obligations towards independent contractors after the contract ends. That means that a business owner doesn’t have to feel guilty about the short-term relationship. Plus, if the employer isn’t happy with the results, they can simply find another freelancer.

How to Hire Independent Contractors

The process of hiring an independent contractor is similar to hiring any other employee, except that the turn-around is usually much faster.

You must first determine the scope of work the contractor will handle and the budget that you’re prepared to spend for their services. Create a job description, such as looking for someone who can create a Google Ads strategy, then post it on a freelance work site like Guru.

Once you get interested applicants, assess them by looking at their previous work or experience. You don’t have to, but you can also set up an interview if needed.

When you find the right fit, have them sign an independent contractor contract, and that’s it! Now, they can work on the tasks needed, and you can sit back and relax knowing that your small business is getting the help it needs in the most efficient way.

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