A contractor agreement—also known as an independent contractor agreement, 1099 agreement, or freelance contract—is a contract between a client willing to pay for the performance of services by a contractor (person, sole-proprietor, or single-member LLC) who is willing to perform the services. Under the Internal Revenue Code (26 U.S.C. §3509), an independent contractor is not an employee, and the client hiring an independent contractor is not responsible for tax withholdings and payment of FICA taxes. A contractor agreement should be in writing, and will usually address issues such as the (1) scope of the work (description of the services); (2) terms and length of the project or service; (3) payment details, including fee deposits, hourly rate, and billing procedure; and (4) confidentiality, non-solicitation, and dispute resolution clauses.

A contractor may also operate as a corporation or multi-member limited liability company, for example, and the contractor agreement with such an entity will be similar to an agreement with an individual who is an independent contractor.

In Alabama, a contractor agreement is a legally binding document between a client and a contractor, where the contractor is engaged to perform services as an independent contractor rather than an employee. This distinction is important for tax purposes, as outlined by the Internal Revenue Code (26 U.S.C. §3509), which indicates that the client is not responsible for withholding taxes or paying FICA taxes for an independent contractor. It is advisable for the contractor agreement to be in written form to clearly outline the scope of work, duration of the project or service, payment terms, and other provisions such as confidentiality and dispute resolution. The agreement serves to protect both parties' interests and clarify the expectations and obligations of each party. Whether the contractor is an individual, a sole proprietor, a single-member LLC, or a larger entity like a corporation or multi-member LLC, the structure of the contractor agreement generally remains consistent, tailored to the specifics of the working relationship and in compliance with Alabama state laws and federal regulations.