Mistake
Treating a contractor like an employee
Setting their hours, requiring a company email, or micromanaging their methods signals employment — which can trigger back taxes, penalties, and benefits claims.
Free. No signup. Correct 1099 classification, confidentiality, IP assignment, and payment terms in one document.
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What an IC agreement is for
An independent contractor agreement documents the working relationship between a company and a 1099 worker. It establishes that the worker is not an employee, protects both sides on IP and confidentiality, and sets payment terms that avoid misclassification risk.
Companies, startups, and small businesses hiring contractors, specialists, developers, or any worker outside their formal payroll. Also used by the contractors themselves to formalize the arrangement.
Any time you bring on a non-employee worker who will have access to proprietary information, create work product, or be paid over $600 in a calendar year. Sign before work starts.
Not appropriate when you control how and when the worker performs tasks, require set hours, provide equipment, or integrate them into your team like an employee — that is an employment relationship requiring a different contract.
What BizDraft asks you
Company name, contractor name, entity types, states.
What the contractor will do. Specific deliverables or ongoing support.
Hourly rate, project fee, or milestone payments. Invoice and payment cycle.
Start date, end date or ongoing at-will with notice period.
Work-for-hire assignment, or license retained by contractor.
Scope of confidential info, duration of obligation, permitted disclosures.
Whether the contractor can recruit your employees or solicit your clients.
Governing state and dispute resolution method.
What the AI generates
Plain-English, state-aware, ready to sign. The sections that protect both parties and keep you on the right side of the IRS.
Explicit statement that the contractor is not an employee, sets their own schedule, uses their own tools, and is responsible for their own taxes.
All work product created under the agreement is assigned to the company on payment. Background IP retained by the contractor is clearly carved out.
Contractor agrees not to disclose company information during and after engagement. Scope, duration, and exclusions defined.
Invoice submission process, net payment window, late fee, and contractor's right to suspend services for non-payment.
Contractor is responsible for self-employment taxes, health insurance, and retirement contributions. Company owes no benefits.
Either party can terminate with specified notice. Payment for work completed through termination date is due.
Common mistakes
The most common mistakes that lead to misclassification liability or unprotected IP.
Mistake
Setting their hours, requiring a company email, or micromanaging their methods signals employment — which can trigger back taxes, penalties, and benefits claims.
Mistake
Without a written assignment, contractors own the work they create by default. The company gets a license, not ownership. Fix this before work starts.
Mistake
Contractors often work across multiple clients. Without confidentiality language, they can freely discuss your project with your competitors.
Mistake
California's AB5, New York, and other states have stricter contractor classification tests. The agreement should reflect your state's rules.
Example
"We're a startup hiring a backend developer on a 6-month project basis. $12,000/month, invoiced monthly, net-15. All code is work-for-hire. NDA included. No non-compete but no soliciting our employees. Texas law."
A 12-section IC agreement, Texas-governed. Explicit contractor status clause, work-for-hire assignment of all code, background IP carve-out. Net-15 payment with 1.5%/month late fee. 12-month non-solicitation of employees. 30-day termination notice.
Word (.docx) for editing in any tool. PDF for sending out as-is. Both formats, no watermark, no account needed.
When to ask a lawyer
BizDraft is a drafting tool. It is not a substitute for a lawyer who knows your specific situation. Reach for one when:
AB5 created narrow exemptions for IC classification. If you are hiring in California, have an employment attorney confirm the arrangement is compliant.
If the contractor will build your core product, handle your trade secrets, or create patentable work, involve an IP attorney before and during the engagement.
Contracts over 12 months or $100,000 in total value warrant attorney review — the misclassification exposure alone can exceed the contract value.
FAQ
The IRS uses a behavioral control, financial control, and relationship type test. Key factors: does the company control how work is done (employee) or just the result (contractor)? Does the contractor work for multiple clients? An IC agreement helps document the independent nature of the relationship, but the actual working arrangement must match.
Yes. If you pay a contractor $600 or more in a calendar year, you must issue a 1099-NEC regardless of whether a contract exists. The contract and the tax filing are separate obligations.
Yes — it is a negotiated term. A contractor may want to retain rights to their methodology, tools, or background IP while assigning the specific deliverables. BizDraft lets you define exactly what is and is not assigned.
Largely the same document. "Freelance agreement" is typically used for individual creatives working on defined projects. "IC agreement" is broader and often used for longer, more technical, or higher-value engagements. BizDraft tailors the language based on your answers.
Yes. No paywall, no trial, no credit card. Read about the business model →
Free. Tailored. State-aware. Yours to keep.
Start your IC agreement