The world’s technological advances in the last decade have made it easier for professionals to build a career online. Developments in social networking, as well as tools for remote collaboration and task management, are creating the perfect environment for freelancers working as 1099 contractors.
Working independently comes with great benefits for both your personal and professional life, which makes it the best option for many people. Do you want to know how working as a 1099 employee benefits you?
Let’s start with the basics:
A “1099 employee”, or independent contractor is a person who offers services to different clients. Their services are independent of the company so they only get paid for the work they perform but do not have the benefits and tax deductions that W-2 employees (salaried workers) would receive from an employer.
Their clients have a low degree of control so they have autonomy over their way of working and take care of all their business expenses. Some of the most common types of 1099 jobs are:
But what are the benefits of working as an independent contractor?
Both your personal and professional life will be impacted when you decide to work independently. Here is a breakdown of the benefits:
Independent contractors have more control over their workload and time, which translates to an improved personal life. This is how your personal life will improve:
Being a 1099 worker, you are your own boss, and this gives you greater flexibility with your time. Because you have complete control of your schedule, you can decide when to work and how many hours you can put in a week.
Of course, your clients need to be taken care of, so you need to be available for meetings and meet deadlines for finishing certain tasks. But you can still arrange your schedule with a lot more freedom than W-2 employees.
Being in control of your schedule will also allow you to invest more time in your well-being. Whether you need time for exercising, being there for your kids when they come home from school, or going out for lunch with your friends. You can always find a way to work around your daily activities.
Having time for yourself can be very beneficial for both your mental and physical health, which in turn will also increase your productivity and creativity when working.
While some companies give independent contractors and freelancers an office space to work from, many of them go for other options. No more losing hours every day stuck in traffic trying to get to the office, you choose where your office will be.
Whether you choose to go to a cafe, work from home, or even find a co-working space where you can meet other freelancers and entrepreneurs. Having this location flexibility will make your workload less stressful, and help your personal development.
Being able to choose when and where you work, also gives you the great opportunity of traveling around the world, without worrying about losing your clients or income. Especially for younger generations, this is a number one reason for becoming an independent contractor.
The most common ambition among millennials is to see the world as well as positively impacting their communities. The 1099 lifestyle certainly allows you to do it. On the other hand, if you are more stable or have other responsibilities that don’t allow you to travel the world, you can still benefit from being an independent worker.
Although you won’t get paid vacations, it will be a lot easier for you to plan holidays and take time off when you need it. Don’t forget to give your clients a heads up before you take vacations, and plan ahead to avoid dropping the ball on important tasks and losing clients.
Independent contractors have to learn many things on your own and find solutions to a variety of problems, possibly in more than one field. That can bring many benefits to your professional life. Here are the main advantages:
As an independent contractor, there will be no employer withholding taxes. This doesn’t mean there are no taxes involved, but you will be paying them differently, and you can use this to your advantage. Being self-employed, you can avoid paying 1099 taxes, but you should still contact a tax professional to help you examine your deductions and avoid audits by the IRS.
You can deposit higher than regular amounts on your retirement accounts, and manage your own social security, healthcare, and income taxes. Another benefit is that you can deduct business expenses like home office supplies, internet travel expenses, or even meals.
You can also check out Bonsai’s Tax Expense Tracker. It is a tool built specifically for self-employed workers to help identify deductible expenses and estimate quarterly taxes.
See for yourself why freelancers love our tax software.
You will have the freedom to select among multiple employers and assignments that meet your wants and needs. 1099 workers are not tied to one company and this gives you a great advantage, especially when starting with a new client.
Because you do not have a long-term commitment, testing out a new client will be easier, as well as refusing those you think might be unsuitable for you. If you don’t like a company or you feel that the pay is not enough for you, just wait for the contract to be over and move on.
Another benefit is that you will be able to negotiate your own rates and terms with your clients. And having no limitations on the hours you work, means that you can decide how much your monthly income will be.
Independent contractors and freelancers on average can earn 40% more than w2 employees in the same business position. This is because companies do not have to pay social security taxes or provide unemployment benefits. This allows freelancers to set higher rates and still get hired.
You may want to specialize in a field, attend classes or seminars to gain additional skills, or take on more assignments that will help you grow professionally. Instead of having to wait for your boss to approve a training course or applying for a new position, you decide what you want to pursue.
Also, if there is a particular industry you want to explore and learn, you can test it out without committing to a full-time job. There are no limits as to what kind of job you can do, as long as you invest the time to learn it.
Working as a freelancer means you won’t have a superior to assist you. It will be totally up to you to complete the job properly and on time. This may sound scary at first, but it will help you develop the skills you need much faster.
As you move around different jobs, you will be learning to use new tools, meet new people, and work on new projects that will challenge you to find better solutions. All this adds up to a greater experience to build up your resume and be a more desirable contractor for the next client.
The number of self-employed people or independent contractors has been rapidly increasing every year. Companies that do not consider offering benefits to 1099 workers are missing out on a wide variety of skilled professionals. For this reason, many employers have started to offer certain benefits to build a strong team of contractors. Be sure to make sure you are an employee misclassified as a freelancer.
These are some of the benefits that you could ask about when negotiating a new contract::
Some companies offer this benefit as an incentive to keep skilled contractors working for them by helping them develop professional skills and provide more growth opportunities.
These educational resources are not for you to learn how to perform your current job, but they can be valuable assets to bring to other projects.
Another option available for employers is to provide travel and equipment discounts. You will enjoy reduced expenses and your work will be performed more efficiently. This can be used in a rate negotiation as it represents a benefit for your client as well.
Companies can offer you access to their group’s health insurance plans or give you the option to buy one. Finding health coverage is more difficult for 1099 workers and some insurance companies do allow businesses to extend health benefits to independent contractors.
As you can see, being a 1099 employee comes with a lot of responsibilities and self-discipline, but the benefits it will bring you are definitely worth the hard work.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?