Client vs. Independent Contractor vs. Subcontractor Contract– Which One Do I Need?
At Trellis, we absolutely love contracts. What’s not to love? They protect your work (and assets/money), help relationships run better, and create ways to solve problems with protections and procedures for when things don’t work out as planned. Two important types of contracts small businesses use are independent contractor agreements and client agreements. But what’s the difference between the two?
In this blog post, we’re seeking to remove some of that mystery. Let’s start with some definitions. An independent contractor agreement is what you can use if you’re bringing someone in to perform services or create work for you (you’re contracting them). A client contract establishes the terms of the working relationship between you and a client who has hired you to perform certain services for them or their business.
If you’re having trouble figuring out which one you need, ask yourself who is providing the contract to whom? If you’re providing services to another party – be it a company, person, or organization – they are your client or customer. You would want to provide them with a client agreement that outlines the scope of the services you intend to provide, how you seek payment from them, and how the relationship will work.
If you’re paying someone to provide services for you (and they aren’t your employee) – they are contractors of yours and you’ll want to provide them with an independent contractor agreement that outlines the relationship and make it clear what they are liable for. One important note here: It’s important to make sure you shouldn’t be hiring that person as an employee rather than an independent contractor. Unfortunately, the law is what dictates if someone does or doesn’t qualify as an independent contractor. (Read our blog post diving into this question in more detail here.)
Here’s an Example.
Say you’re a photographer. Someone calls and asks you if you’d be available to take photos and edit them for their upcoming event. You would want to send them a client contract that outlines important details you want to include, such as the package of services they have purchased, when the event is, how you want to handle payment (will you want to take a deposit to secure the date?), and what happens if they cancel (or something arises and you need to cancel as well). Then let’s say you’re busy taking photos and working for clients, and you never seem to have time to update your website with your latest photos. So you hire someone to help you to update your website and upload photos for you over the next few weeks (but don’t control how or when they do it). You will want to give them an independent contractor agreement that clearly outlines what they will be doing for you, what they are going to be paid, how either of you can terminate the contract, and make it clear they can’t use any of the photos or confidential information you give them.
Okay, but what about a subcontractor agreement?
A subcontractor agreement is if someone has been contracted to do work for another and wants to bring you in to help them fulfill that contract. Let’s go back to our photographer. Let’s say the photographer is so busy with events to photograph that they don’t have time to edit the photos from the events. So they contract with another person/company to provide editing services. This would be a subcontractor because they are hiring someone/a company to work on deliverables for the photographer’s client, which is different than just doing work for the photographer. The subcontractor agreement will include similar things to the independent contractor agreement but will also likely include terms around the subcontractor not contacting or working with the client directly without the photographer’s permission, payment terms that align with the payment terms with the client, etc.
Once you’ve determined what type you need, you can better understand what kind of key terms you’ll want to include and what to watch out for, both relevant in different types of contracts (read our blog post about this!) you’ll be thankful to have in a number of scenarios. And if you’re interested in learning more about these types of contracts, we have a ton of free resources that you can find in the Free Resources section of our website here.
And if you’re really lost with which one to use, or want help making sure you’ve thought about all of the protections you need, give us a call, and we can help you figure out what type works best for your needs and work. We also have our Trellis DIY Documents available for sale if you don’t have the budget for custom legal work yet. Before you know it, you’ll be thankful for all of your different types of contracts and start to nerd out just like us. (You can’t say we didn’t try.)
DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.