Making the Independant Distinction

I received some interesting advice recently regarding how the government of Canada can view long-term contracts.

I'm currently being sub-contracted by a consulting firm. This firm basically puts me out on contracts they source under their banner, and I in turn invoice them for my time at my rate. To the end-clients, it appears that I'm just an employee of the company though.

However, going into these sort of arrangements can get dicey depending on how Revenue Canada views it. Instead of you being an independent consultant on a contract, they could say that you're just a term employee with a different pay structure. Items such as business cards with your name on it but with your client's logo on it only help Revenue Canada's case.

So what can you do? Make sure that you show that there's a clear separation between yourself and the organization you're contracting under:

- Create your own website and your own online identity, clearly stating that you are available for contract work and open to being contacted.

- Get your own business cards made up. Don't fret too much about a logo, or color scheme, or anything like that; you can always change that later. The important thing is that you have something to hand out that clearly shows you as an independent entity.

- Get other work. You may have a great sub-contract going on providing great work, but you should still try to get other work and show that you are truly diversifying your client base and not just "terming" it with one company.

- Don't sign anything that limits your outside activities. Most companies will want you to sign some form of "Invention Covenant" or the like, which will state that the consulting company holds rights to anything you create during the course of employement. That statement alone I have no problem with: if you work for them, and you create a framework on their behalf or for their product or whatever, then its theirs. BUT, where it gets dicey is when (and most typically will add this in) they specify that the reach of those rights extend beyond working hours, and include anything done at home or for any other client. This is where you need to draw the line...the company is just protecting their interests and insuring their own trade secrets don't get leaked out, which is understandable...but you need to protect your own organization's interests as well.

- Before signing anything, have it reviewed by your lawyer and possibly also by your accountant. Your lawyer can identify any concerns or issues with the agreement, and your accountant can warn you about any concerns from a taxation point of view (in this case, whether Revenue Canada might have issues with the agreement)

- Retain a lawyer if you don't have one, and get an accountant if you don't have one. ;)

D