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Business Licenses for Independent Contractors
Independent contractors (the word “independent” is redundant) are distinct from employees in that they are the bosses of their own jobs. Independent contractors are hired to complete a certain job, but how they reach the final result is up to them, as based on their professional knowledge and experience.
Contractors are trained professionals. As “journeymen,” they need to be licensed by the vocational licensing board in their state. But as non-employees (i.e., employers), contractors also need to hold a local business license, for the right to hire employees and do business in the city.
A business license is essentially a city tax receipt. Contractors-employers pay a relatively inexpensive fee, around $30 - $50, and get the right to operate their businesses within the city limits. Penalties of several hundred dollars will be assessed for contractors operating without a business license.
In order to obtain a business license, an independent contractor has to do a little research about the city in which they will do business. The first step may include looking at to the city’s website, or walking up the steps of the city hall. The office in charge of business licensing may be, depending on your city: the building and safety commission, the chamber of commerce, the city clerk, the zoning and planning department, department of public works, or simply the tax office.
In San Francisco, for example, a contractor would deal with the Office of the Treasurer and Tax Collector. Most employers would pay a $150 business license registration fee, and then payroll tax would be collected at 1.5%. Failure to register is a misdemeanor, punishable by fine and/or imprisonment.
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