Draft consulting agreements that hold up to a 1099 audit
Independent-contractor classification, IP assignment, scope-of-work, rate caps, pass-through expenses — built to the right tests per state.
Quick Answer
LexDraft applies California's ABC test (AB5), Massachusetts' ABC test, federal common-law control test, or the IRS 20-factor test based on the jurisdiction you pick. The default structure (deliverable-based, no benefits, contractor-owned tools, no operational integration) is built to reinforce 1099 classification. Misclassification-risk warnings fire during review if the deliverables read more like ongoing employment.
Classification risk — handled by state
Strict ABC test states
California (AB5), Massachusetts, New Jersey. Contractor must be (A) free from control, (B) work outside the usual course of business, (C) customarily engaged in independent trade. LexDraft flags any contract where (B) is doubtful.
Modified ABC + carve-outs
Several CA-style states with industry carve-outs. LexDraft applies the appropriate exemption rules per profession.
Common-law / IRS 20-factor
Most other states + federal default. LexDraft structures the deliverables, payment, and tools-provision to weight all 20 factors toward contractor status.
Standard 1099 (lowest risk)
Texas, Florida, most southern states. LexDraft applies the standard form with the IRS-aligned structure.
What's in every consulting agreement
- Independent contractor classification with the appropriate state test reinforced in the recital + acknowledgement clauses
- Scope of work (SOW) referenced as an exhibit or schedule — keeps the master agreement clean for multi-engagement contractors
- Hourly rate + monthly cap + pre-approved expense pass-through (default; switchable to fixed-fee, retainer, or milestone)
- IP assignment: full assignment to company (work-for-hire + present-tense assignment), with named-exhibit list of contractor's pre-existing Background IP
- Confidentiality + non-disclosure (parallel structure to standalone NDA; consistent with the master)
- Termination-for-convenience: 14 days written notice either party (default; adjustable)
- Non-solicit of company employees (12 months post-termination)
- No employee benefits acknowledgement — contractor expressly waives any claim to health insurance, equity, PTO, etc.
- Indemnification by contractor for misclassification-related tax claims (where state law allows)
- Choice of law + venue + mandatory arbitration with FAA preemption
Stop drafting consulting agreements that fail a 1099 audit
LexDraft applies the right classification test, structures the deliverables to reinforce contractor status, and flags misclassification risk before the contract goes out.
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