An independent contractor is someone who works for someone else, but not as an employee. The primary difference between an independent contractor and a sole proprietor is that an independent contractor usually provides a service rather than a product.

Do I need a business to be an independent contractor?

Do I need a business license? Yes, if you are not paid as an employee, you are considered an independent contractor and are required to have a business license.

Can you be a sole proprietor and still be an independent contractor?

At the same time, you can be an independent contractor as it relates to working for someone else and receiving a 1099-MISC to show your earnings, instead of a W-2 (received by employees). Your 1099-MISC income is included in your Schedule C, along with other business income you receive.

What kind of business entity is an independent contractor?

An independent contractor can be any type of business entity (sole proprietor, corporation, LLC, partnership), but most independent contractors are sole proprietors.

Do you have to register your business as a sole proprietor?

You don’t have to register your small business as a sole proprietor with your state, as you would have to do if you have an LLC or corporation business type. And you there’s no way to register as an independent contractor; you just receive income from a 1099-MISC and report it on your business tax return.

What kind of insurance do sole proprietors need?

Sole proprietors who double as independent contractors also need business insurance, and if they are working as a service provider for a company, it could be a requirement. So if a contractor hurts someone or damages a third party’s property, the contractor’s insurance policy pays for damages rather than the client’s insurance.