Never misclassify again: 7 defining factors of independent businesses

Misclassifying an employee as an independent contractor is a real problem for that employee, but also the employer. So, what are the surefire ways of identifying an independent business?

The Independent Contractor Compliance Blog has devised a list of factors that should squash any confusion about the difference between an independent business or contractor and an employee.

Most of the factors listed could also be attributed to consultants working as an independent business:

1. An independent business will provide skills that your company doesn’t specialize in. Consultants provided by the business are most likely not providing the same services performed by regular employees.
2. Typically the business is brought on to perform a specific service, not for a specific time period worked.
3. The business most likely markets itself to attract new clients and you may have learned of them through ads, word-of-mouth or even a competitor.
4. Independent businesses will have a business name, sometimes a physical location, and investment in things other than an individual’s time and skill.
5. It decides how it will perform the service and can make decisions about the job that will affect its gain or loss. Because efficiency is key to their turning a profit, independent businesses have a true risk of loss.
6. Most likely, this independent business isn’t just doing business with you but has many clients they rely on.
7. An independent business also should have the ability to assign or reassign their consultants to work on certain projects.