3. How to Structure an Independent Contractor Relationship
a. How to Properly Document the Relationship
First and foremost, to avoid the risks of re-characterization of an independent contractor to an employee, it is preferable that the contracting party for consultancy services is a limited liability company that is registered for F tax. Further, it is important that the independent contractor is actually independent from the hiring company, e.g. that the contractor performs work for other hiring companies and that the contractor uses its own equipment. In a consultancy agreement it is important to define the task or assign-ment and how the work should be performed. Moreover, the registration for F tax should be an essential condition to the agreement.
b. Day-to-Day Management of the Relationship
It is of importance in the day-to-day management of the relationship to respect that the contractor is not an employee and thus is not supposed to be instructed as if an employ-ment relationship was at hand. It is also of relevance how remuneration for the results is handled, e.g., the invoice could preferably be based on the delivery of the assignment, or hours of work performed, rather than be based on a fixed weekly/monthly fee. Further, if possible, it is preferable to allow the contractor to perform work for other principals in addition to the company. In the case of a re-characterization, the course of the day-to-day management may be even more important than the written contract.