The Legal Aspects of Being a Business


One of PICA’s core values is entrepreneurship — to be your own business so you can be paid as a business and therefore take advantage of valuable business-owner tax deductions and retirement plans. Being a business will help you earn more and keep more of what you earn. That’s the good news. The bad news is you need to understand the basics of being a business, like what’s required by law and how to handle the contracting process.

Although the legal ins-and-outs of being a business can be overwhelming, they don’t need to be. PICA provides all the resources and services you need, as well as others you may need as your business evolves. Essentially, the legal aspects of being a business include the following:

Don’t be overwhelmed if you’re just starting out as an independent consultant, just be willing to learn, starting with the topics as listed above.

If you’re more established, you’ll likely learn some tips about contracting, and you’ll probably appreciate our resources on how to navigate vendor compliance.

In the sections below you’ll find information about being self-employed and handling the contracting process.

PICA members have access to members-only content in this section, as well as web workshops, virtual roundtables, and PICA Office Hours. Non-members and members alike can access free content below, and submit questions on PICA's Facebook page.


Foundational Concepts for Every Independent Professional

As an independent consultant, you should operate and present yourself not only as a senior professional but also as a business owner. This will help you to be paid more and keep more of what you earn.

Lifecycle Stage Title Description
What/Who is a Professional Independent Consultant? As we go to market or talk about ourselves, we need to convey three key elements. This article explains what they are and offers suggestions to help you "walk the talk."
2-minute video: Why Friends Don't Let Friends W-2 Be sure you understand why it's better for you as a self-employed professional to be paid on a 1099 tax basis instead of a W-2 tax basis.
Tax Status: 1099 vs. W-2 How you are paid by clients impacts how you pay your taxes, along with how much tax you owe. This article explains why being paid on a 1099 tax basis is a huge plus.
Temporary Employee vs. Independent Contractor Whether you call yourself a consultant, contractor, or freelancer, the only status that matters is how you are classified and paid. Be sure you understand the various labels and terms so you know how to position yourself for success.
Beware of Staffing Agencies Understanding why third-party firms are usually bad for consultants is crucial. They can cost you money, even if you're paid on a 1099 tax basis. Be informed and improve your profitability!
Costly Mistake: Paying a Consultant as a Temp Worker Be sure you understand the 4 reasons why paying an independent consultant on a W-2 tax basis is bad for both you and the client.
Legal Alert: Court Ruling Makes Independent Contracting More Difficult: What to Do As a self-employed consultant, it's getting harder to qualify as an independent contractor, especially in light of the California Supreme Court's April 2018 ruling. Find out what you need to do to maintain your 1099 tax status.
As we go to market or talk about ourselves, we need to convey three key elements. This article explains what they are and offers suggestions to help you "walk the talk."
Be sure you understand why it's better for you as a self-employed professional to be paid on a 1099 tax basis instead of a W-2 tax basis.
How you are paid by clients impacts how you pay your taxes, along with how much tax you owe. This article explains why being paid on a 1099 tax basis is a huge plus.
Whether you call yourself a consultant, contractor, or freelancer, the only status that matters is how you are classified and paid. Be sure you understand the various labels and terms so you know how to position yourself for success.
Understanding why third-party firms are usually bad for consultants is crucial. They can cost you money, even if you're paid on a 1099 tax basis. Be informed and improve your profitability!
Be sure you understand the 4 reasons why paying an independent consultant on a W-2 tax basis is bad for both you and the client!
As a self-employed consultant, it's getting harder to qualify as an independent contractor, especially in light of the California Supreme Court's April 2018 ruling. Find out what you need to do to maintain your 1099 tax status.

Resources by Lifecycle Stage

Although there are only two educational resources listed here, they cover a very complicated and important subject. Looks can be deceiving! There’s a ton of useful information, from sample documents to tips on how to phrase or negotiate certain elements. Even the most seasoned consultant will learn a thing or two from these articles; we did when we wrote them. ;-) That’s why they’re tagged for every lifecycle stage, not just for newbies.

Lifecycle Stage Title Description
What to Do If Your Client Doesn't Pay This article by PICA's Chief Advocate explains how to collect payment without hiring a lawyer.
The ABC's of Contracting LOA, MSA, PSA, SOW, NDA, SLAs — Learn about the basic contract types and when/how to use them; understand what various contract elements like indemnification mean; get tips on how to use the contracting process to your advantage.
Contracting Carefully: Things to Look Out For Regardless of who writes the agreement, know what language to include, exclude, watch out for, and negotiate to protect your interests.
This article by PICA's Chief Advocate explains how to collect payment without hiring a lawyer.
LOA, MSA, PSA, SOW, NDA, SLAs-Learn about the basic contract types and when/how to use them; understand what various contract elements like indemnification mean; get tips on how to use the contracting process to your advantage.
Regardless of who writes the agreement, know what language to include, exclude, watch out for, and negotiate to protect your interests.

Related Tools, Services, and Events

Lifecycle Stage Tool/Service/Event Description
Tool: Letter of Agreement (LOA)
Download the tool (MS Word)
The simplest contract, an LOA states what you're agreeing to do, by when, and for how much money. Use this sample to create your own.
Tool: Statement of Work (SOW)
Download the tool (MS Word)
An SOW is usually paired with a Master Services Agreement or other overarching contract. As such it excludes most of the legalese. Use this sample to create your own. (For an MSA, we recommend using a Consulting Services Agreement from LegalZoom; see below.)
Tool: Change Order for Duration
Download the tool (MS Word)
Use a change order when the client wants to extend your contract. Use this sample to create our own.
Tool: Change Order for Scope and Duration
Download the tool (MS Word)
Use this change order when your client wants to expand the scope and the timing. Use this sample to create your own.
Web Workshop: Keeping It Legal as an Independent Consultant
Offered several times a year; see Calendar
In this session led by PICA's General Counsel, you'll learn the basics of contracting as a small business as well as how to maintain your independent status.
Virtual Roundtable: Keeping It Legal
Offered several times a year; see Calendar
Get your questions answered after a brief summary of common contract watch-outs. Hosted by PICA's General Counsel. (All-In members only)
Partner Service: LegalZoom
Get access to 160+ downloadable legal forms; start here. Available to Pro+Legal and All-In members.
LegalZoom's forms and templates are included for PICA members at the Pro+Legal and All-In levels, including business documents, like a Nondisclosure Agreement or Consulting Services Agreement. (Note: Activation is required and takes about 24 hours to get your unique discount code.)
Partner Service: LegalZoom
Register your business or set up an LLC; start here. Discount of 15% available to Pro+Legal and All-In members.
PICA members at the Pro+Legal or All-In levels get a 15% discount on LegalZoom products and services, including Business Advisory Plan membership, which allows you to work with LegalZoom's network of independent attorneys.* (Note: Activation is required.)

Tool: Letter of Agreement (LOA)

Download the tool (MS Word)

The simplest contract, an LOA states what you're agreeing to do, by when, and for how much money. Use this sample to create your own.

Tool: Statement of Work (SOW)

Download the tool (MS Word)

An SOW is usually paired with a Master Services Agreement or other overarching contract. As such it excludes most of the legalese. Use this sample to create your own. (For an MSA, we recommend using a Consulting Services Agreement from LegalZoom; see below.)

Tool: Change Order for Scope and Duration

Download the tool (MS) Word

Use a change order when the client wants to extend your contract. Use this sample to create our own.

Tool: Change Order for Scope and Duration

Download the tool (MS) Word

Use this change order when your client wants to expand the scope and the timing. Use this sample to create your own.

Web Workshop: Keeping It Legal as an Independent Consultant

Offered several times a year; see Calendar

In this session led by PICA's General Counsel, you'll learn the basics of contracting as a small business as well as how to maintain your independent status.

Virtual Roundtable: Keeping It Legal

Offered several times a year; see Calendar

Get your questions answered after a brief summary of common contract watch-outs. Hosted by PICA's General Counsel. (All-In members only)

Partner Service: LegalZoom

Get access to 160+ downloadable legal forms; start here. Available to Pro+Legal and All-In members.

LegalZoom's forms and templates are included for PICA members at the Pro+Legal and All-In levels, including business documents, like a Nondisclosure Agreement or Consulting Services Agreement. (Note: Activation is required and takes about 24 hours to get your unique discount code.)

Partner Service: LegalZoom

Register your business or set up an LLC; start here. Discount of 15% available to Pro+Legal and All-In members.

PICA members at the Pro+Legal or All-In levels get a 15% discount on LegalZoom products and services, including Business Advisory Plan membership, which allows you to work with LegalZoom's network of independent attorneys.* (Note: Activation is required.)

* Excludes subscription renewals, third-party products and fees and attorney-assisted products. Discount code will be sent after PICA verifies membership.