1099 classification, IP ownership, and confidentiality — the three things that must be in writing before a contractor touches your project.
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What's happening here
You need work done that isn't worth a full-time hire. You found the right person. The problem is that everything you're about to give them access to — your systems, your strategy, your clients — has no legal protection without a signed agreement.
You've agreed on a project and a rate. The contractor is an independent professional, not an employee. The work begins soon. Nothing is in writing about who owns what they build or what happens to your business information.
Under US copyright law, work created by a contractor belongs to the contractor by default — not you. Without a written IP assignment, the developer who built your app may legally own it. The IRS also scrutinizes contractor classification, and misclassification carries back taxes and penalties.
Contractors who walk away and take the code. Confidential client lists exposed to a competitor. An IRS audit reclassifying your contractor as an employee because the working relationship looked like employment. These are common, not edge cases.
The right agreement for this situation
The IC agreement covers the working relationship. The NDA covers information. The IP assignment covers ownership. Together they close the gaps that expose businesses when contractors are involved.
Core contract
Defines the 1099 relationship explicitly. Establishes the contractor's independence (their own tools, their own hours, no benefits), the scope of work, payment terms, and termination rights. This is the classification firewall.
Confidentiality
The contractor is receiving your confidential information — client names, pricing, source code, business strategy. A one-way NDA makes it illegal for them to use or disclose what they learn. Often embedded in the IC agreement, but worth a standalone document for sensitive work.
Ownership
A separate assignment clause or standalone document that transfers any work product, code, designs, or creative output from the contractor to you. Without this, you have a license to use the work — not ownership of it. For software and custom creative work, this document is non-optional.
What BizDraft asks you
Your business name and the contractor's full legal name or entity name. The agreement uses the correct designations for 1099 classification language.
The specific services or deliverables. BizDraft uses this to populate the scope and to confirm the independent nature of the work relationship.
Hourly, fixed-price, or milestone-based. Payment schedule and method. Whether there's a kill fee if the engagement ends early.
Whether all work product transfers to you on delivery, on payment, or via a separate assignment. BizDraft defaults to transfer-on-payment and flags the risk if you choose otherwise.
The type and sensitivity of confidential information the contractor will access. This determines how tightly the NDA is drafted and how long the confidentiality obligation lasts.
Whether the contractor can work for direct competitors while engaged. State law varies significantly on enforceability — BizDraft flags this by state.
What to watch out for
The most expensive mistake in contractor agreements. Without a written IP assignment, copyright in creative work defaults to the creator. The contractor legally owns what they built for you.
If your contract specifies work hours, requires use of your equipment, or tells the contractor how to do their work (not just what to deliver), the IRS may treat them as an employee — triggering payroll taxes you didn't budget for.
A contractor with access to your client list, pricing, or source code who leaves and takes it with them has no liability without a signed NDA. The obligation must exist before the information is shared.
If the engagement isn't working out, how do you end it? What notice is required, and what happens to in-progress work? Agreements without termination language leave both parties in an unclear position when the relationship sours.
Example
What you tell BizDraft
"I'm hiring a frontend developer as a contractor to build a customer dashboard for my SaaS product. Fixed price $12,000, paid in two milestones. I need to own all the code. She'll have access to our internal staging environment. California."
What BizDraft generates
An IC agreement with explicit 1099 language, milestone payment schedule, IP assignment clause transferring all code to the company on final payment, a confidentiality clause covering the staging environment, and California-compliant non-solicitation language (no non-compete due to CA law).
Download options
A Word file and PDF with all three components — IC agreement, embedded IP assignment, and confidentiality clause. Edit any section inline before downloading. Send via SignNow or email.
Frequently asked questions
The IRS uses a multi-factor test centered on behavioral control, financial control, and relationship type. The key distinction: you control the result, not the method. If you're setting their hours and providing their equipment, you're likely looking at an employment relationship.
In most states, yes — but enforceability varies. California prohibits them almost entirely. States like Texas and Florida enforce them with certain conditions. BizDraft flags this by governing state and defaults to non-solicitation language where non-competes are unenforceable.
Not necessarily. BizDraft can embed the IP assignment within the IC agreement. A standalone IP assignment document is useful when you want to record the transfer with the copyright office or when the contractor is signing after the work is already delivered.
That's a negotiation point, not necessarily a dealbreaker. Some contractors retain a license while assigning the copyright. Others request a right to show work in their portfolio. These are addressable in the contract — but if they won't assign at all, you may not own what you're paying for.
Draft the IC agreement with IP assignment before the first task starts.
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