Learning how to set up an independent contractor business can be extremely beneficial to many people. There are many benefits to becoming an independent contractor including higher income, more flexible hours, and better working conditions. In fact, it is usually easier to find jobs as a contractor because it is cheaper for the employer to pay you and pay for taxes.

Unlike regular employees, contractors work on a contract or as needed basis. These contracts may last a few months, several weeks, or only until a piece of work is completed. For this reason, most contractors find work from several employers at the same time or in short periods of time. Having their skills in such demand can offer a more secure feeling.

How Do I Become a Contractor?

To be considered an independent contractor by the government you will generally:

  • Have ownership of part of your own business
  • Have several employers each year
  • Be skilled or have expertise in a specific area
  • Rely on no one else for supplies and materials
  • Have short, temporary job assignments
  • Be employed on a temporary basis or for a short amount of time per employer
  • Have projects where clients are the decision makers for the results

Each country has different requirements as a contractor, to find out for sure check your government's website.

As an independent contractor, there are benefits that you can really appreciate.

  • As a contractor, you answer to no one but yourself. With more independence, you also seem to have more job security.
  • Being your own boss allows you the work/life balance you have always dreamed of. You work when you need or want to. There are no business meetings, politics, or daily commutes to endure. It's your life and business so you can live it how you see fit.
  • You get paid depending on the hours you put in, the words you type, or the products you make. The higher the demand for your skills, the higher your potential income could be.
  • Working for yourself gives you an opportunity to take your ideas and make something out of them. See if your skills or expertise is something you can market and make a living on. This can be done as you to continue with your day job until you can quit and make a career of contracting.
  • Being a contractor may allow you to start a new career without much experience, time, and/or money to invest by beginning part-time. This is great for those who might be thinking of a career change but aren't sure if they are a good fit for it yet.
  • Working as an independent contractor can get your foot in the door of a company even if they are not offering good full-time positions. This is also beneficial if the company proves to not be a good employer.

Downsides to Being an Independent Contractor

There are a few downsides to being an independent contractor. First, there are no sick days or paid time off. You only get income for the work you put in. Retirement plans, company pensions, and healthcare packages, including dental insurance, are also not available. Your employer or client can also terminate your employment without losing anything.

Setting up As a Contractor

Choose a Name

Select a name that makes sense with your line of work. As you start printing business cards and invoices you will want a professional sounding name. However, it may require you to fill out a Fictitious Business Name Statement depending on the county you live in. It's very inexpensive and easy to accomplish.

Procure a License

In some areas, you may also be required to have a business license. There is usually a small fee involved and a simple form to fill out. It is usually recommended to go ahead and get this done whether you know you need it or not. You may also need to acquire a special vocational license. Your trade association will know if one is needed.


Taxes, as a contractor, are not taken out of your paycheck. Therefore, you have to take care of it all yourself. Business expenses can be deducted here to help out tremendously. Depending on your situation, you might be able to create a tax loss. If you start paying your estimated taxes, it will give you a stronger case.

If you need help starting an independent contractor business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.