Small business owners who are looking to outsource work often turn to independent contractors to fulfill their needs. However, it is important to understand what an independent contractor is and how they are different from employees.

The Small Business Administration (SBA) defines an independent contractor as someone who is self-employed and provides services to a business under a written or verbal agreement. They are not considered employees because they work independently and are responsible for their own taxes and benefits.

There are several factors that determine whether a worker is an independent contractor or an employee. These include:

1. Control: Independent contractors have more control over their work than employees. They decide how and when to complete their work and are not subject to the same level of oversight and direction as employees.

2. Tools and equipment: Independent contractors typically provide their own tools and equipment, whereas employees are provided with the necessary tools and equipment by their employer.

3. Relationship: Independent contractors have a business-to-business relationship with their clients, whereas employees have an employer-employee relationship.

4. Payment: Independent contractors are usually paid by the job or project, whereas employees are paid by the hour or on a salary basis.

It is important for small business owners to properly classify their workers as independent contractors or employees to avoid legal and financial consequences. Misclassifying workers can result in penalties, back taxes, and even lawsuits.

If you are unsure whether a worker should be classified as an independent contractor or an employee, seek the advice of a legal professional. It is better to be safe than sorry when it comes to compliance with labor laws and regulations.

In conclusion, the SBA defines an independent contractor as someone who is self-employed and provides services to a business under a written or verbal agreement. Small business owners should take care to properly classify their workers to avoid legal and financial consequences. If in doubt, seek the advice of a legal professional.