[consulting] Setting Up as an Independent Contractor

[Sami Khan]

I want to make two points:

1) In my experience it's generally a bad idea to sub-contract unless you
absolutely have to... I don't do it at all anymore because I have
essentially found it to be less profitable and overall more problematic.

It only makes sense if the contractor provides something that you can
not provide. Essentially what you are agreeing to is communication
overhead between yourself and the client, losing a certain amount of
control, and adding complexity. Further, it's hard to get up front
payments from the client if you are being sub-contracted as it adds an
extra step. It's better to let the 3rd party keep a finder's fee for
finding a client if you can't do marketing, than taking on a project
with someone.

2) Businesses have the ability to fire on demand, especially
contractors. Businesses also get to make all the decisions and so on. I
agree with the general reasonable part, but I think that there are often
too many things out of the control of the contractor. Therefore, I do
believe in sound contracts, businesses are always open to renegotiate
them if they don't like certain terms, but I will start off with a
decent agreement that holds me liable for nothing. 

One way I have found to reduce problems is short billing cycles, and
easy termination. That way a business can decide quickly if they don't
like way things are going... Limiting recourse, damages, and defining
procedures for dealing with conflict is always wise.

I will disagree with you somewhat on collecting from customers that
don't want to pay. If you have a sound contract, it's almost trivial, if
you can establish work was rendered, to get a settlement against the
client in small claims court and then turn that over to a collection
agency.

Everyone has their own philosophy, and what works for them... 

I think it is in the interest of everyone to look out for themselves to
the best of their ability.

Sami


On Sun, 2010-03-28 at 23:38 -0500, Eric Tucker wrote:
> 
> ----- "Sami Khan" <sami at etopian.net> wrote: 
> > From: "Sami Khan" <sami at etopian.net>
> > To: eric at semperex.com, "A list for Drupal consultants and Drupal
> service/hosting providers" <consulting at drupal.org>
> > Sent: Sunday, March 28, 2010 10:06:42 PM GMT -06:00 US/Canada
> Central
> > Subject: Re: [consulting] Setting Up as an Independent Contractor
> >
> > I am sorry but when you work on Drupal, you should retain the rights
> to
> > your code or it should be GPL, I hate the idea of businesses
> > appropriating not only labour but intellectual property as well.
> Just
> > because this is the norm does not mean its right or fair.
> 
> The spirit of Drupal is GPL.  Extensions to Drupal should in many if
> not all cases be GPL, but I can't sit here and say without some
> evaluation whether this is true in all cases.
> 
> From a legal perspective I believe there are certain aspects of Drupal
> integration that may or may not fall under GPL requirements, and I'm
> not qualified to get into the details as I am not a lawyer.
> 
> While I cannot say I by any means open source every line of code I
> develop personally or pay others to develop, I do believe in the value
> of open source.  I am currently working on some projects which will
> likely lead to open sourced components.
> 
> > 
> > In any case obviously businesses are built on trust, but there are
> > always cases where trust falls through or a situation occurs which
> is
> > out of the control of both sides and the business decides that the
> > contractor should pay for the work or that it should be free. They
> then
> > make up lies and stories in order to keep from paying for the
> project,
> > speaking from experience here. As such contracts are contingencies
> when
> > trust does not work any more. They are absolutely necessary because
> > otherwise you are prey to all the weirdos out there. 
> > 
> > Let's also notice that contractors usually don't have the profits
> > businesses do to cover loss, they are more or less working for a
> > salary... and therefore, should protect themselves to the greatest
> > extent provided by law.
> 
> I think there's a reasonable balance as I have seen unreasonable
> contracts out there.  I won't sign a one-sided contract, but I won't
> draft one either.  I do from time to time see poorly written or very
> one-sided contracts.  In extreme cases, I've seen those who are uber
> focused on an arbitrary set of terms in a contract lose-out on
> business b/c they're deemed as too hard to work with or don't
> structure the deal such that it inherently keeps the client satisfied
> and positions them for more work.
> 
> If the business fails to meet its obligations, the contractor needs to
> be protected.  Likewise if the contractor fails to deliver, then the
> business needs to be protected as well.  Doing both well in a contract
> is generally reasonable so long as certain liabilities are capped and
> remedies are not too extreme.  My key word when coming up with any
> sort of contract always is "reasonable".
> 
> All sides should in general see such terms as reasonable.  While I
> won't dispute that there are some bad people out there who will take
> advantage of others, keeping everyone agreeable and viewing terms as
> reasonable means a lower likelihood of problems and reaching that
> point of contention where things blow apart.  A lot of lawyers tend to
> draft things too far in the favor of their client, and I've seen this
> cause unnecessary difficulties or even various parties to walk away.
> Lawyers need to be managed, and the maximum possible protection is not
> always what's fair.  The right kind of attorney knows where the
> balance is but may yet require a bit of guidance.  I never blindly
> follow the advice of legal.
> 
> In America, there are tons of boiler-plate contracts out there which
> might require a bit of tweaking by an attorney.  If you work with an
> attorney, get one who understands the software business.  That's
> important.
> 
> I'm clearly not a lawyer, so I can't give legal advice.  What I look
> for ... The basic issues are a payment schedule, a well defined
> project scope on lump sum, deliverables expectations, IP assignment,
> confidentiality and non-employee status.  When doing it between
> companies, a master services agreement with a per project scope is
> fairly common.  There is not substitute for money up front and being
> paid frequently.  No matter what's in a contract, forcing somebody who
> really doesn't want to pay you to pay you is difficult and potentially
> expensive.  You can also put termination fees in a contract, but if
> parting on bad terms they may be hard to collect unless you're taking
> them out of a deposit.
> 
> I'm also careful about the nature and scope of non-compete clauses,
> and I am generally shy about agreeing to such things but will do it in
> some circumstances.  Think this through, and depending on who you're
> dealing with it may be an arbitrary thing you can question and strike.
> 
> In Texas as most places I'm familiar with, there are generally two
> types of contractors: (1) "contract employees" and (2) "independent
> consultants" aka "contractor/consultant".  The former are very much
> analogous to employees and may in fact be employees working for a
> contract house depending on the exact structure.  The latter I think
> refers more to what we're talking about?  Consultants generally do get
> to charge a bit higher rate while not meeting the true sales tax
> definitions of a consultant in Texas.  Such consultants work generally
> on a per project basis with specific objectives.  Consultants may
> charge lump sum, hourly or by some other means that may or may not be
> similar to salary.  However, there is no guarantee of continued
> employment, and there are far fewer protections than actual employees
> get.  To make up for this, the rates are usually a good bit higher on
> an hourly basis (or work out that way).  The more hours that get
> committed to, sometimes the lower the rate becomes.  Consultants make
> the (hopefully) conscious decision to work less steady work for more
> money when they do work.  (There is another type of consultant that is
> a bit more like the classical definition of a consultant in other
> non-software disciplines ... that's a different thing in my mind.)
> 
> When you become a consultant, you become a business.  Sure, it may not
> be quite like a big blue chip company with a dental plan right off the
> bat but ... you are negotiating for yourself, deciding what you charge
> and deciding what you will give and get for that.
> 
> In Texas, "consultants" (as opposed to contract employees) are quite a
> good bit different from direct hire employees.  Fundamentally, there
> must be a value exchange on both sides.  Unlike an employee who may be
> retained for a while during a period of low performance, the reality
> is that such consultants are terminated much more quickly.  Companies
> will find a way to oust or fire a contractor/consultant who does not
> deliver, and it may not be pleasant or overt.  A
> contractor/consultant's best assurance for future work and to be paid
> for current work is to provide good value to a client and to be needed
> by that client in the future.  The more unique or compelling that
> value is, the better.  That's not an invitation to unethically
> engineer one's irreplaceability through poor documentation, etc. as
> more savvy clients will figure this out and give the
> contractor/consultant the boot sooner or later.  However, it speaks to
> above all else ... deliver, and don't be shy about telling the client
> what value you have provided.  If there's no potential of future work
> or some kind of ongoing relationship, then I generally don't wish to
> engage.
> 
> Legal action to collect a bill is potentially expensive, time
> consuming, reputation damaging and will not lead to more work from
> that client.  Cover yourself properly and structure sustainable deals
> that work for you and others.  Meeting commercially accepted legal and
> industry standards make you look more professional just like any other
> aspect in which you are professional.
> 
> Re-evaluate and potentially adjust your standard rates once a year,
> and lock in rates for around 1 year at a time in contracts.  Keep a
> relatively consistent rate structure across clients, but make sure
> that rates are representative of value provided and expertise required
> relative to the market.  You can charge a certain percentage of your
> "standard rate".  For example, you might charge 75-85% of standard
> rate for a client that gives you a lot of work that is relatively
> straightforward and this is necessary to get the work (hey, the
> economy isn't stellar these days).
>   
> In my view, a higher rate basically means you are willing to take more
> risk and more responsibility.  You're also getting more money ... but
> not everyone will pay it, so it's a calculation you have to make.
> 
> Charge enough to cover your risks.  If you want as little risk as
> possible, there's no shame in looking to get a direct hire job as an
> employee as soon as you can. 
> 
> Whatever you do, stay focused on making a strong business case for
> keeping you (and the business that is you as a contractor/consultant)
> around.
> 
> > 
> > 
> > Regards,
> > Sami
> > 
> > On Mon, 2010-03-29 at 02:58 +0000, Eric Tucker wrote:
> > > Hi guys,
> > > 
> > > Just a few thoughts. I'm on both sides of the coin as both a
> consultant and one who does purchase services from subcontractors as
> well as for my own projects. 
> > > 
> > > Typically, my clients will want ownership or unfettered licenses
> to the code. Investors tend to prefer that the company they are
> investing in owns the code, and as I do not wish to be a hindrance to
> my clients that means code gets assigned to them. However if the
> client is okay with it, for reusable code I put in a license to be
> able to reuse the code for other purposes. 
> > > 
> > > There are many forms of licensing and types of licensing. 
> > > 
> > > You can make code assignable upon delivery or payment. 
> > > 
> > > In general, I try to run as close to a zero balance project as I
> can. The client pays a certain amount up front or as a deposit, and
> then the remainder is paid upon delivery or as we go along in regular
> intervals. If being paid prior to delivery or specific milestones, I
> insist on seeing intermediate progress from my contractors.
> Furthermore, I try my best to show the end client all progress. I'm
> all about openness in this regard. I give it, and I expect it. 
> > > 
> > > I cannot ask for a good amount up front without having built up
> some trust. Trust is a two way street, and both should give the other
> some trust and work to build the level of trust incrementally where
> possible. 
> > > 
> > > I shy away from one off deals or those without an ongoing future
> relationship, so my advice may not be pertinent to all. 
> > > 
> > > If there is an established relationship, then I may get less up
> front or do work on a 30 to 45 days basis.  This is not without some
> risk, but I've only been burned once. 
> > > 
> > > When I purchase services, I look for the same terms I would expect
> to be held to.
> > > 
> > > Remember this:  being a contractor is running a business. Business
> is best built on relationships. Relationships are best built on trust.
> Trust must be two ways and be built up over time.  Others will not
> trust if some trust is not given. I try to build relationships with
> those I can trust and who can learn to trust me. It takes time. 
> > > Sent wirelessly via BlackBerry from T-Mobile.
> > > 
> > > -----Original Message-----
> > > From: Sami Khan <sami at etopian.net>
> > > Date: Sun, 28 Mar 2010 19:50:43 
> > > To: Dave Hall<me at davehall.com.au>
> > > Cc: <consulting at drupal.org>
> > > Subject: Re: [consulting] Setting Up as an Independent Contractor
> > > 
> > > Dave,
> > > 
> > > I agree. 
> > > 
> > > However, better to have a contract with at some of the
> aforementioned
> > > things than no contract at all. Anyone can go and get an actual
> lawyer,
> > > but some people will not... So better they have some advice from
> people
> > > with experience, rather than no advice.
> > > 
> > > That being said, do by all means invest in a lawyer, a book
> keeper, an
> > > accountant, and so on... It does serve its purposes when you are
> in a
> > > heated situation... Lots of ass holes are out there to get you if
> you
> > > are not diligent.
> > > 
> > > Sami
> > > 
> > > On Mon, 2010-03-29 at 12:34 +1100, Dave Hall wrote:
> > > > Hi,
> > > > 
> > > > >From experience, have a contract drafted by a lawyer can save
> you a lot
> > > > of hassle.  It should contain things like, who retains ownership
> of the
> > > > work (should be you), what happens when they don't pay (penalty
> > > > interest), what is the legal jurisdiction for disputers (where
> you live)
> > > > and what expenses the client is expected to cover (long
> distance, travel
> > > > accommodation, meals etc).  
> > > > 
> > > > On several occasions I have bashed clients over the head with my
> > > > contract.  Having a relationship with a solicitor also makes it
> easy for
> > > > getting letters of demand issued by the lawyer too.  
> > > > 
> > > > My contracts have 2 parts the generic contract and the project
> specific
> > > > schedule which contains information about the project, rates
> etc.  The
> > > > schedule is referred to by the contract, so I can recycle the
> same
> > > > contract for all of my clients.
> > > > 
> > > > If the client wants variations to my standard contract they can
> pay my
> > > > legal bills so I get the advice I need before drafting/signing
> it.
> > > > 
> > > > When it comes to company structure, tax and book keeping advice,
> invest
> > > > in a good accountant.  The money you pay them is a usually a
> deductible
> > > > expense, and can help you structure your affairs in such a way
> that you
> > > > you end up in front even after pay for their services.
> > > > 
> > > > Cheers
> > > > 
> > > > Dave
> > > > 
> > > > On Sun, 2010-03-28 at 09:10 -0600, Sami Khan wrote:
> > > > > It doesn't have to be that complicated, but it can be if you
> run into
> > > > > the wrong sort of person and/or situation. Just make sure you
> have
> > > > > plenty of disclaimers in there and clauses that keep them from
> suing you
> > > > > for any reason whatsoever, you can opt for a mediator if there
> needs to
> > > > > be a way to resolve disputes. That's the biggest thing.
> Further, have
> > > > > all terms of work clearly laid out, and the fact that they
> will be
> > > > > billed for any additional work on an hourly basis. I am also
> not a
> > > > > lawyer either.
> > > > > 
> > > > > Regards,
> > > > > Sami
> > > > > 
> > > > > On Sun, 2010-03-28 at 09:00 -0600, Steve Kessler wrote:
> > > > > > Becoming an independent contractor has lots of legal
> implications on
> > > > > > both the state and federal level in the United States if
> that is where
> > > > > > you are. It is probably best that you consult your
> jurisdiction about
> > > > > > what they require. Colorado for example does business
> registrations
> > > > > > through the Secretary of State office. An attorney and tax
> accountant
> > > > > > are good resources in this process. I know this is not an
> answer with
> > > > > > real answers but hopefully this will give you an idea where
> to
> > > > > > look….oh ya and my attorney requires me to say that I am not
> an
> > > > > > attorney and this is not legal advice.  
> > > > > > 
> > > > > >  
> > > > > > 
> > > > > > -Steve   
> > > > > > 
> > > > > >  
> > > > > > 
> > > > > > Steve Kessler 
> > > > > > 
> > > > > > Denver DataMan 
> > > > > > 
> > > > > > 303-587-4428 
> > > > > > 
> > > > > > Sign up for the Denver DataMan Free eNewslettter
> > > > > > 
> > > > > >  
> > > > > > 
> > > > > >  
> > > > > > 
> > > > > > From: George Lee [mailto:georgeleejr617 at gmail.com] 
> > > > > > Sent: Sunday, March 28, 2010 8:22 AM
> > > > > > To: consulting at drupal.org
> > > > > > Subject: [consulting] Setting Up as an Independent
> Contractor
> > > > > > 
> > > > > > 
> > > > > >  
> > > > > > 
> > > > > > Hello,
> > > > > > 
> > > > > > Also do folks have information on what steps to take to be
> an
> > > > > > independent contractor? Want to make sure I'm follow the
> right
> > > > > > procedures.
> > > > > > 
> > > > > > Peace, community, justice,
> > > > > > - George
> > > > > > 
> > > > > > 
> > > > > > _______________________________________________
> > > > > > consulting mailing list
> > > > > > consulting at drupal.org
> > > > > > http://lists.drupal.org/mailman/listinfo/consulting
> > > > > 
> > > > > 
> > > > > _______________________________________________
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> > > > 
> > > > 
> > > > 
> > > 
> > > 
> > > _______________________________________________
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> > 
> > 
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