Freelancer, Independent Contractor, or Work-for-Hire?

There is often a great deal of confusion about freelancing, working as an independent contractor for a client, and work-for-hire and how they relate to the IRS and you as a business owner.

Freelancers are in fact, independent contractors who are self-employed.  The IRS classifies freelancers as Independent Contractors.

Freelancers/Independent Contractors:

  • work on a per-project, contracted basis
  • control the rights to their work
  • determine when, where, and how they work
  • work with multiple clients concurrently
select who they work with
  • provide their own equipment
  • provide their own space and materials
  • receive a 1099 from the person utilizing their services
  • are paid in partial or lump sums for projects
  • are responsible for paying their own taxes on ALL income/payments received for services, whether they were issued a 1099 or not
  • are the owners of the work they create, whether it’s for a client or a personal project. As the author of the work, the independent contractor negotiates the sale or license of usage rights to the client.

In a work-for-hire situation:

  • the freelancer agrees to a work-for-hire relationship and is acting as an employee without receiving the benefits of
  • the client owns the copyright to whatever the artist creates— from the very moment the work is created, it’s owned by the client or the employer.
  • the freelancer will receive a W-2 from the employer as an employee of the company. The employer will deduct the taxes from your pay for that specific work performed as an employee of their company.

For a work to qualify as work-for-hire, it either has to be created by an employee within the scope of that individual’s job (in which case the copyright belongs to the employer or firm), or it must meet one of nine categories as defined in the Copyright Act (U.S.C. §101):

  1. as a contribution to a collective work
  2. as a part of a motion picture or other audiovisual work
  3. as a translation
  4. as a supplementary work
  5. as a compilation
  6. as an instructional text
  7. as a test
  8. as answer material for a test,
  9. as an atlas

There are “gray” areas to any agreement.   If you are ever presented with a contract and have reservations or are unsure about what you’re being asked to sign, consult with an attorney before you sign anything.  If there is no contract, then there may be an implied license that exists. Meaning by accepting the money for the work, creating it and submitting it to the buyer, you, through your actions, grant a license to the buyer and possibly all rights to the work.