What is an independent subcontractor?

What is an independent subcontractor?

Subcontractors are hired by independent contractors rather than a company or individual to do a specific job. Because the subcontractor isn’t being paid directly by the person that hired the independent contractor, their payment is dependent upon payment to the independent contractor.

How do you become an independent subcontractor?

Make sure you really qualify as an independent contractor. Choose a business name (and register it, if necessary). Get a tax registration certificate (and a vocational license, if required for your profession). Pay estimated taxes (advance payments of your income and self-employment taxes).

Are 1099 employees the same as subcontractors?

You issue a Form W-2 to an employee. A subcontractor is a worker who is not your employee. You give a Form 1099 to a subcontractor showing the amounts you paid him. The difference between an employee and a subcontractor depends on your right to direct and control the worker.

How is a subcontractor paid as an independent contractor?

These contractors set their own rates and schedules for labor and payment. Typically, they are paid through the accounts payable department at a company. This independent contractor then employs subcontractors who are paid and controlled by the contractor but who still performs labor for the employer.

What are the benefits of being an independent contractor?

Unlike employees, independent contractors determine the terms of how they perform the task they are contracted to complete. Because independent contractors are not employees, they do not usually have taxes withheld when they are paid for their work. Benefits like retirement plans, vacation time, and sick pay do not extend to contract workers.

Which is an example of a subcontractor contract?

For example, a builder may employ an electrician to do the electrical labor or employ a plumber to handle plumbing services. A subcontractor contract usually exists between a contractor and a subcontractor. The subcontractor is required to finish certain jobs for the contractor.

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