{"ok":true,"canonical_url":"https://dealroom.so/glossary/independent-contractor","api_url":"https://dealroom.so/api/public/glossary/independent-contractor","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-16","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"independent-contractor","term":"Independent contractor","group":"People and paperwork","definition":"A self-employed individual providing services to a business under contract, not as an employee. Misclassifying employees as contractors can lead to significant tax and legal penalties for the business.","what_it_means":"During due diligence, scrutinize the seller's use of independent contractors. The IRS has strict classification rules. If the business has misclassified employees, you could inherit substantial liabilities for unpaid payroll taxes, benefits, and penalties. Insist on proper classification or seller indemnification.","url":"https://dealroom.so/glossary/independent-contractor","official_sources":[],"related":[{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"slug":"liability","term":"Liability","url":"https://dealroom.so/glossary/liability"},{"slug":"tax-penalty","term":"Tax penalty","url":"https://dealroom.so/glossary/tax-penalty"}],"related_questions":[{"question":"Can I use an SBA 7(a) loan to acquire a business that relies heavily on independent contractors instead of employees?","url":"https://dealroom.so/sba-7a/questions/can-i-use-an-sba-7-a-loan-to-acquire-a-business-that-relies-heavily-on-independent-contrac"},{"question":"When is an independent business valuation required for a partner buyout?","url":"https://dealroom.so/sba-7a/questions/when-is-an-independent-business-valuation-required-for-a-partner-buyout"},{"question":"Is an independent appraisal always required when an acquisition includes significant goodwill?","url":"https://dealroom.so/sba-7a/questions/is-an-independent-appraisal-always-required-when-an-acquisition-includes-significant-goodw"},{"question":"When is an independent appraisal required for non-real estate business assets being acquired?","url":"https://dealroom.so/sba-7a/questions/when-is-an-independent-appraisal-required-for-non-real-estate-business-assets-being-acquir"},{"question":"How long does an independent business valuation typically take for a $1.5 million acquisition?","url":"https://dealroom.so/sba-7a/questions/how-long-does-an-independent-business-valuation-typically-take-for-a-1-5-million-acquisiti"},{"question":"Does the SBA require an independent business appraisal for a business acquisition costing $400,000?","url":"https://dealroom.so/sba-7a/questions/does-the-sba-require-an-independent-business-appraisal-for-a-business-acquisition-costing-"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Independent contractor","url":"https://dealroom.so/glossary/independent-contractor","source_type":"DealRoom Data"}}