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an independent contractor is a natural person business or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement unlike an employee an independent contractor does not work regularly for an employer but works as and when required during which time he or she may be subject to law of agency independent contractors are usually paid on a freelance basis contractors often work through a limited company or franchise which they themselves own or may work through an umbrella company in the United States any company or organization engaged in a trade or business that pays more than $600 to an independent contractor in one year is required to report this to the Internal Revenue Service as well as to the contractor using form 1099 Mis C this form is merely a report of the money paid independent contractors do not have income taxes withheld from their pay as regular employees do independent contractor versus employee in the Uni