Know the Difference Between Contractors and Consultants

Question:

What is the difference between a Consultant and a Contractor?

Answer:

The short answer is that the Consultants role is to evaluate a client's

needs and provide expert advice and opinion on what needs to be done,

while the Contractors role is generally to evaluate the client's needs

and actually perform the work.

However, these terms, Contractor and Consultant, have become blurred

over the years and at times have been used interchangeably. Especially

when the Consultant, after having given his or her professional opinion

or advice on what has to be done, then enters into an agreement

(contract) to provide the services required. At that point the

Consultant may be said to become a Contractor. The terms have also

become blurred as industry has incorporated them into employee job

titles.

Generally, a Consultant is a self-employed independent businessperson

who has a special field of expertise or skill. The consultant provides

professional or expert opinion, advice, or services regarding

information or materials in his or her field of knowledge or training

to assist others in making decisions or in performing tasks.

On the other hand, a Contractor is a self-employed independent

businessperson who agrees (contracts) to do work for another usually

for a fixed price. It is usually an 'arms length' transaction. The

individual hiring the contractor defines the desired results and the

schedule. The contractor may supply labor only or labor and supplies.

The Contractor generally retains control over the work to be done

including the means and methods used to do the job, the scheduling of

the underlying work, who performs the work and determines how the work

will get done within the standards and time requirements set. A

contractor will generally use his own tools and work equipment and may

employ others to do the work for them.

The definition of the terms becomes critically important when a trying

to decide whether an individual is an employee, contractor or

consultant. Generally, contractors and consultants are not employees.

They are individuals from outside of the organization that perform

services for the organization and are not subject to the various state

and federal payroll withholding tax laws. Contractors and Consultants

are more likely to be paid without a withholding and issued a federal

tax form 1099 for any monies received. There are some 20 or so factors

used by state and federal agencies, including the IRS, to determine

which category, contractor -- consultant -- employee) an individual

falls into.

If you need more detailed information or have any further questions you

should contact an attorney with expertise in this field in your local

area.

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