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Updated: Sep 5, 2022

Liquid has the features you need to stay compliant.

Independent Contractor Compliance. You know it’s essential to classify your independent contractors correctly. Reports have shown that 10-20% of independent contractors are misclassified. And misclassification leaves your business open to liabilities and penalties due to violations of tax and employment laws.

Download Liquid’s W2 Employee or 1099 Independent Contractor Quick Guide to learn about the behavioral, relationship and financial factors that affect how you classify your relationships with freelancers.


Hiring independent contractors/freelancers increase flexibility and reduce labor expenses (i.e., training and tax costs). Many behavioral, financial, and relationship control factors determine whether you are actually hiring a W2 employee or a 1099 independent contractor.

Here are some Liquid features that help you with independent contractor compliance.

Behavioral Factors

  1. Liquid makes it easy to create projects with specific timeframes.

  2. With Liquid, you can effortlessly agree to project SOWs with your freelancers.

  3. Creating projects in Liquid makes it clear that your freelancers are being evaluated solely on the end products or services provided.

Financial Factors

  1. With Liquid, you can quickly agree to specific hourly rates or project-based fees for each SOW.

Relationship Factors

  1. Liquid simplifies signing independent contractor agreements with your freelancers and vendors.

  2. Liquid encourages contractors to use an EIN (versus SSN), which helps make it clearer that you are using a 1099 worker versus someone you should be hiring as a W2 employee.

  3. Liquid helps with the consistent treatment of your outside vendors in a scalable way.

  4. Using Liquid allows you to separate the management of your full-time employees from your outside contractors and vendors.

  5. Liquid allows your freelancers to quickly create SOWs with other clients, which reinforces their independent contractor status.

This separation is similar to how companies have adopted the use of third-party companies to source and contract with 1099 workers. And it relates to the ABC test: if you have independent contractors on the same systems that are used to manage employees, you are more at risk of violating the ABC test.

If you are working with properly classified 1099 independent contractors and/or vendors, Liquid helps you stay compliant. Try Liquid today!



2 min read

Liquid Helps You With Independent Contractor Compliance

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