Glossary · People and paperwork
Independent contractor
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.
What it means in a deal
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.
Related terms
Common questions about Independent contractor
- Can I use an SBA 7(a) loan to acquire a business that relies heavily on independent contractors instead of employees?
- When is an independent business valuation required for a partner buyout?
- Is an independent appraisal always required when an acquisition includes significant goodwill?
- When is an independent appraisal required for non-real estate business assets being acquired?
- How long does an independent business valuation typically take for a $1.5 million acquisition?
- Does the SBA require an independent business appraisal for a business acquisition costing $400,000?
Defined by CapBench 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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