Consultant Agreements

Written by Kathleen Gagne
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Before you become a party to consultant agreements, you should learn the difference between a consultant or independent contractor and an employee. There are very specific rules and regulations governing your relationship with your employees. You must, in fact, pay out more for your employees each month than the amount of their salaries. This includes making contributions to Medicare and Social Security.

Consultant Agreements Differences

You are not required to pay a consultant or subcontractor one penny more than the rate or total amount agreed on in consultant agreements. You do not have to withhold taxes or have the consultant sign a Federal W4 form. Your only obligation is to file a 1099-Misc if you pay the consultant more than $600 for his or her services.

Generally, you will hire a consultant when you need to access expertise in a specific area. Most independent contractors perform a specific service such as computer repair or lawn service. Consultants, however, may provide expertise in your type of business, and the purpose of hiring one is usually to improve some facet of your business or to handle the specialized needs of a specific project or customer.

Consultant agreements protect both the company and the consultant because they are legally binding contracts and are subject to rule of law should a dispute arise. It is important to clearly state that the company is engaging the consultant for services that are concretely defined. In addition, other terms of the agreement, such as the length of the agreement, the amount to be paid, and the conditions under which the agreement may be terminated. Confidentiality should be included along with a definition of what items must be protected. Consultant agreements should be reviewed by your attorney before you sign them, and you should know that you can purchase excellent templates online.


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