Independent contractors enter into an agreement with a business or firm through a written contract that details the duties, pay, responsibilities, etc of each.

This independent contractor agreement is then executed independently of the business or organization by the independent contractor. In this way independent contractors differ from employees because they are not entitled to typical employee benefits such as health insurance, retirement benefits, social security, etc. They work at their own pace and on their own terms as long as they fulfill the conditions of the contract.

An independent contractor can be any individual or any business that performs services for another person or business under an agreement but is not subject to that person or business in the manner, means, or right to control their performance of those services. The person or business that hires an independent contractor is not themselves liable to others for any acts or omissions carried out by the independent contractor.

The independent contractor is clearly distinguished from an employee who would work on a regular basis for an employer. The independent contractor is responsible for their own income taxes and Social Security. They also do not benefit from an employer's health plan or retirement benefits and are often not entitled to any workman's compensation.

A number of factors should be considered when evaluating the position of an individual in relationship to a business in order to determine if they are actually an employee or an independent contractor.

First of all, the degree of control that the company or business exerts over the work of the individual is important. An employer has control of an employee in ways that they do not have control of an independent contractor. If the company has the right to direct and control the individual not only regarding the desired results but in their details, such as the ways and means by which those results need to be accomplished, then the company is exerting control over the individual. This right to control and supervise the details of the work being performed implies an employer to employee relationship. It is the lack of control and immediate supervision by a company that creates the independent contractor status. It is the simple right to this control which is the key factor is determining whether the individual is an independent contractor or employee.

In fact, independent contractors are a legal category of worker clearly defined by the IRS, or Internal Revenue Service. The definition relies on the fact that unlike an employee, an independent contractor can retain control over how exactly the work that they are hired to do is performed. They decide how the work gets done, while the individual or business that is paying them can only control the final product or service.

Of course, there are other factors to consider such as the connection between the individual and the business or company and how regularly they conduct business together.