The Legal Aspects of Being a Business
One of PICA’s core values is entrepreneurship — to be your own business so you can be paid as a business and therefore take advantage of valuable business-owner tax deductions and retirement plans. Being a business will help you earn more and keep more of what you earn. That’s the good news. The bad news is you need to understand the basics of being a business, like what’s required by law and how to handle the contracting process.
Although the legal ins-and-outs of being a business can be overwhelming, they don’t need to be. PICA provides all the resources and services you need, as well as others you may need as your business evolves. Essentially, the legal aspects of being a business include the following:
- Understanding independent contractor status and compliance. See Foundational Concepts below.
- Forming your business, including determining your appropriate business structure, registering your business, and/or getting a business license. These topics are covered in the Being a Business section of our site.
- Contracting with your clients. See below. Learn how to review, negotiate, and use sensible consulting contracts to align interests up front and avoid trouble down the road.
- Understanding vendor compliance and how to navigate the process. While not the sexiest topic, it’s super important for being paid on a business-to-business basis. See our proprietary Vendor Compliance section.
Don’t be overwhelmed if you’re just starting out as an independent consultant, just be willing to learn, starting with the topics as listed above.
If you’re more established, you’ll likely learn some tips about contracting, and you’ll probably appreciate our resources on how to navigate vendor compliance.
In the sections below you’ll find information about being self-employed and handling the contracting process.
PICA members have access to members-only content in this section, as well as web workshops, virtual roundtables, PICA's Office Hours, or by emailing PICA's Chief Advocate. Non-members and members alike can access free content below.
Foundational Concepts for Every Independent Professional
As an independent consultant, you should operate and present yourself not only as a senior professional but also as a business owner. This will help you to be paid more and keep more of what you earn.
| Lifecycle Stage | Title | Description | |
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What/Who is a Professional Independent Consultant? | As we go to market or talk about ourselves, we need to convey three key elements. This article explains what they are and offers suggestions to help you "walk the talk." | |
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2-minute video: Why Friends Don't Let Friends W-2 | Be sure you understand why it's better for you as a self-employed professional to be paid on a 1099 tax basis instead of a W-2 tax basis. | |
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Tax Status: 1099 vs. W-2 | How you are paid by clients impacts how you pay your taxes, along with how much tax you owe. This article explains why being paid on a 1099 tax basis is a huge plus. | |
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Temporary Employee vs. Independent Contractor | Whether you call yourself a consultant, contractor, or freelancer, the only status that matters is how you are classified and paid. Be sure you understand the various labels and terms so you know how to position yourself for success. | |
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Beware of Staffing Agencies | Understanding why third-party firms are usually bad for consultants is crucial. They can cost you money, even if you're paid on a 1099 tax basis. Be informed and improve your profitability! | |
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Costly Mistake: Paying a Consultant as a Temp Worker | Be sure you understand the 4 reasons why paying an independent consultant on a W-2 tax basis is bad for both you and the client. | |
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Legal Alert: California Law, AB 5, Makes It Harder to Be Hired as an Independent Contractor | As a self-employed consultant, it's getting harder to get paid on a 1099 tax basis. PICA’s lawyer summarizes AB5 and what you need to do increase your odds of passing the new test. |
Resources by Lifecycle Stage
Although there are only two educational resources listed here, they cover a very complicated and important subject. Looks can be deceiving! There’s a ton of useful information, from sample documents to tips on how to phrase or negotiate certain elements. Even the most seasoned consultant will learn a thing or two from these articles; we did when we wrote them. ;-) That’s why they’re tagged for every lifecycle stage, not just for newbies.
| Lifecycle Stage | Tool/Service/Event | Description | |
|---|---|---|---|
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What to Do If Your Client Doesn't Pay | Having trouble getting paid? Learn how to collect payment without hiring a lawyer. | |
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The ABC's of Contracting | LOA, MSA, PSA, SOW, NDA, SLAs -- Learn about the basic contract types and when/how to use them; understand what various contract elements like indemnification mean; get tips on how to use the contracting process to your advantage. | |
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Contracting Carefully: Things to Look Out For | Regardless of who writes the agreement, know what language to include, exclude, watch out for, and negotiate to protect your interests. | |
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Legal Alert: Corporate Transparency Act | Independent Consultants May Need to Comply with New Corporate Transparency Act. |
Legal Alert: Corporate Transparency Act
Independent Consultants May Need to Comply with New Corporate Transparency Act.
Related Tools, Services, and Events
| Lifecycle Stage | Tool/Service/Event | Description | |
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Reference Guide: Keeping It Legal Checklist Download it here (PDF) |
Use this handy checklist to help you qualify for independent contractor status, when you want to hire subcontractors, and for when you need to review a client's contract. | |
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Tool: Letter of Agreement (LOA) Download the tool (MS Word) |
The simplest contract, an LOA states what you're agreeing to do, by when, and for how much money. Use this sample to create your own. | |
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Tool: Statement of Work (SOW) Download the tool (MS Word) |
An SOW is usually paired with a Master Services Agreement or other overarching contract. As such it excludes most of the legalese. Use this sample to create your own. | |
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Tool: Change Order for Duration Download the tool (MS Word) |
Use a change order when the client wants to extend your contract. Use this sample to create our own. | |
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Tool: Change Order for Scope and Duration Download the tool (MS Word) |
Use this change order when your client wants to expand the scope and the timing. Use this sample to create your own. | |
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Web Workshop: Legal Aspects of Solo Consulting Offered several times a year; see Calendar |
In this session led by PICA's General Counsel, you'll learn what it takes to maintain your independent status, whether or not to hire subcontractors or employees, as well as the basics of contracting as a small business. Bring your questions! |
Reference Guide: Keeping It Legal Checklist
Download it here (PDF)
Use this handy checklist to help you qualify for independent contractor status, when you want to hire subcontractors, and for when you need to review a client's contract.
Tool: Letter of Agreement (LOA)
Download the tool (MS Word)
Tool: Statement of Work (SOW)
Download the tool (MS Word)
Tool: Change Order for Scope and Duration
Download the tool (MS) Word
Tool: Change Order for Scope and Duration
Download the tool (MS) Word
Web Workshop: Legal Aspects of Solo Consulting
Offered several times a year; see Calendar