Fulfill These Essential Requirements to Become an Independent Contractor

Many contractors started working on some projects; then, slowly, it became their business as independent contractors. This means that now the independent contractors should meet basic requirements. You must be thinking: "As long as I work and get paid, does it matter? The answer is yes; whenever you provide a service to your client and get paid, you have to go through several government guidelines even if you work for just an hour, a week, or a month.

Let us know what these basic requirements are.

What are the minimum requirements to be an independent contractor?

If you start from the basics, these 4 things are essential criteria when you start as an independent contractor:

>First, make sure you are an independent contractor

>Choose a unique business name

>Obtain a tax registration certificate

>Pay taxes according to your business income estimates

Make sure you are an independent contractor

First you need to make sure that you are an independent contractor working for yourself in a business. If you are working under the control of someone else, then you are an employee. As an IC you have the all right to control what and how you do the work.

If you consider the following points, you can be sure that you are an independent contractor. Read here:

Test for independent contractor status

In plain English, there is no specific test that determines your status as a contractor. However, many government agencies follow the "right to control test." From this test, you can test your work status as an employee or independent contractor. The test emphasizes if the hiring company controls every bit of your work, i.e., what, when, where, and how the work is to be done, then you are called an employee. However, if the company has little control over your work, from the initial stage to final delivery, then you may be considered an independent contractor.

Here are some factors counted as an independent contractor:

>Working for several clients

>No interruption from hiring companies

>Invests the business costs yourself

>Works according to own schedule

>Use of a written contract for independent contractors

Choose a unique business name.

To appear professional in the market and get added value, you need to have a business name instead of using your name on an invoice or business card. Many business owners don't want their name to be registered as the legal entity of their business. Such people can register it as a fictitious business name, also known as an assumed name, or DBS (doing business as). For example,

There are reasons why it is necessary to register the business name:

>Customers have easy access to the business owner for complaints.

>The bank will reject the account as your business name until you provide identification.

>You cannot enforce any action if you sign a contract under an unregistered name.

How to register as a fictitious business name?

Different countries usually have different processes and fees. Like in California and many other states, it is registered at the state level through the state clerk. And, in states like Florida, the registration is at the state level through the Department of State. As a suggestion, you should contact the Department of the Country Clerk and ask for the information, i.e. the process, requirements, and fees.

Alternative option

If you use your full name as your business name, you do not need to register it.

Obtain a tax registration certificate

Many cities and countries want every business, be it a small business (a single-handed business), home-based business, registering with the local tax collectors, and obtaining a tax certificate. This certificate can be defined as a business license that you are doing business in a particular city. And to get the privilege of setting up your business in the city, you have to pay taxes.

Alternative option

Some businesspeople avoid or fail to register with tax collectors. This allows them to be under the radar of the local government. The cost of registration is not high, but the penalty for operating the business without a license can be hundreds of dollars.

Pay taxes according to your business income estimates.

As an independent contractor, you are responsible for all the work, i.e., completing tasks, tracking ROI, and managing your taxes. Therefore, you need to save the money to pay your tax at the end of the year.

If your business income is $400 or more, you should report this income to the IRS. In addition, if your income is a substantial profit, the IRS asks you to pay in four installments (estimated taxes).

How do you manage IC taxes?

Well, as an independent contractor, you have several projects going on at the same time. Working on the tasks can be easy compared to managing your income taxes. To make this process easy and hassle-free, you can use contractor invoicing software that manages your reports, expenses, ROI tracking, and tax calculation automatically.

Many freelancers or independent contractors are already using this contractor invoicing software in different parts of the world. You can find different variants of such contractor invoicing software in the market. According to our research, Invoicera is the best contractor invoicing software can be a viable choice for independent contractors as it offers 18+ features at 0 costs.

Final words

Once you have completed the four basic steps, you can start offering services as an independent contractor. Among these four steps, the biggest concern under your supervision is tracking the ROI of your business and tax calculation every year. As explained above, the safe way is to use freelance contractor invoicing software to avoid interrogations if, by chance, your manual accounting turns out to be wrong. Therefore, leave no room to get an objection as an independent contractor.