Glossary · People and paperwork
In short
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.
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.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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