Hiring an Independent Contractor or Employee

Hiring an Independent Contractor or Employee from The Startup Garage
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It is important that you know the difference between hiring an independent contractor vs. an employee so that you can determine which is best for you and your business.  Before reviewing the pros and cons of each, start by gaining an understanding of the differences between the two:

Independent Contractor

  • Operates under a business name other than your own
  • Operates as an employee under that business name and therefore limits your ability to control the contractors tools, processes, hours, etc
  • Maintains a separate business checking accounts
  • Represents the contractor’s business name and advertises his/her services as such
  • Invoices for work completed
  • Likely has more than one client
  • Keeps separate business records


  • Performs duties and responsibilities as dictated by you and your company
  • Requires added responsibility such as training, support, health benefits, management, etc.
  • Works for only one employer, your business

With a brief understanding of the differences between independent contractors and employees, you can begin to think of the benefits that each present.

Independent Contractor

  • Often cheaper in terms of associated labor costs and overhead
  • No health benefits are required
  • Flexibility in regard to only hiring when works is demanded of your company, especially for businesses that are seasonal or experience fluctuating streams of business
  • Reduction in liability
  • More flexibility in regard to hiring and firing


  • Stronger sense of loyalty and dedication
  • Employees can perform a variety of roles
  • Improved work flow, especially for businesses that experience a steady stream of business

It is important that you take the proper legal steps when hiring an employee or independent contractor and ensure that you hire them under the correct legal classification in order to avoid costly legal consequences down the road.


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About Tyler Jensen

I work with entrepreneurs who are looking to attract investment and get out of the "Garage". I am passionate about helping entrepreneurs start companies that matter. I helped launch over 100 Companies, Non-Profits and Social Enterprises. I consider myself a serial entrepreneur, startup coach & trusted advisor. * Launching New Companies (For Profit, Non-Profit and Social Enterprise) * Expert Business Plan Writer * Extensive Network of Business Relationships focused on Launch & Rapid Growth of New Companies * Startup, Growth, Marketing, Technology, Web, Business Systems * Trusted Advisor to CEO’s & Entrepreneurs * Capital Raising Strategy Development * Startup Team Development The first company I started and sold is VAVi Sport & Social Club which grew to over 25,000 members in six years, was recognized as San Diego’s 30th fastest growing private company in 2006 by the San Diego Business Journal and 32nd fastest in 2007, and sold for over 25X the capital investment.