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Consulting Agreement
Set up a successful consultancy by outlining scope of work and payment from the start. Let an attorney take the lead to create, revise, and customize your agreement.
Starts at
$899
Includes attorney guidance, revisions, and a custom template
Have questions? Call (855) 306-2319 for a free discovery call.
Why get attorney support from LegalZoom?
Predictable flat fee
Get dedicated attorney support to prepare your consulting agreement for an affordable flat fee.
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Our law firm LZ Legal Services co-counsels with experienced local attorneys to guide you step-by-step through the process and help prepare your state-specific template.
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Save time with one convenient place to find experienced attorneys, track document progress, and get the dedicated legal support you deserve.
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Tell us the details about your legal need, the state you live in, and how we can reach you.
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Sit tight while your attorney does the rest
Your dedicated attorney will review your information then upload a customized document or recommendations to your account so you can download and sign or notarize, if necessary, to make it official.
Have questions? Call (855) 306-2319 for a free discovery call.
What is a consulting agreement?
Similar in many ways to an employment agreement, a consulting contract is a way for businesses to set expectations with outside consultants they hire to tackle certain tasks or projects. In addition to outlining expectations, however, these contracts can also protect your business from harm, specify payment terms, and shield your from potential issues with employee misclassification.
Often, businesses will maintain a standard consulting agreement tailored to their specifications, then modify that agreement to incorporate terms as needed for each consultant they hire.
Often, businesses will maintain a standard consulting agreement tailored to their specifications, then modify that agreement to incorporate terms as needed for each consultant they hire.
What your lawyer will include in your consulting agreement
During your initial consultation with your new contract attorney, they'll go over the details of what you expect from future consultants, then plan out the best way to build a consulting agreement to match those goals. Usually, that agreement will include:
Consultant’s and employer’s full information
As a matter of course, all legally binding agreements should contain contact information for all parties involved.
Scope of consultant's duties
Central to any good consulting agreement is a clear description of the consultant's job duties, usually related to a specific project or goal. Your contract lawyer will include information about the scope of these duties, when, where, and how they should be executed, and what happens if those duties aren't fulfilled.
Compensation
All consulting agreements should contain details about the consultant's rates, how often they are to be paid, how they should be paid (check, direct deposit), and what should be done in the event of late payments or missed deadlines.
Termination clause
Just like it's important to outline what you expect a consultant to accomplish, your consulting agreement should also outline what happens when those expectations aren't met. Your contract attorney will outline clear, actionable steps to take if termination becomes necessary.
Intellectual property ownership
Independent though they may be, any work done by a consultant you hire should remain your company's property, including documents, applications, and training resources. Your attorney will make sure to include clear, enforceable language regarding intellectual property ownership.
Confidentiality agreements
Many consultants are given access to sensitive information about their client's business, which is why it's crucial to always include a non-disclosure agreement or other form of legally binding confidentiality when creating a consulting agreement.
Signing requirements
To ensure that a consulting agreement will hold up in court, many attorneys include signing requirements, such as signing in the presence of witnesses or using a licensed notary.
Consultant’s and employer’s full information
As a matter of course, all legally binding agreements should contain contact information for all parties involved.
Scope of consultant's duties
Central to any good consulting agreement is a clear description of the consultant's job duties, usually related to a specific project or goal. Your contract lawyer will include information about the scope of these duties, when, where, and how they should be executed, and what happens if those duties aren't fulfilled.
Compensation
All consulting agreements should contain details about the consultant's rates, how often they are to be paid, how they should be paid (check, direct deposit), and what should be done in the event of late payments or missed deadlines.
Termination clause
Just like it's important to outline what you expect a consultant to accomplish, your consulting agreement should also outline what happens when those expectations aren't met. Your contract attorney will outline clear, actionable steps to take if termination becomes necessary.
Intellectual property ownership
Independent though they may be, any work done by a consultant you hire should remain your company's property, including documents, applications, and training resources. Your attorney will make sure to include clear, enforceable language regarding intellectual property ownership.
Confidentiality agreements
Many consultants are given access to sensitive information about their client's business, which is why it's crucial to always include a non-disclosure agreement or other form of legally binding confidentiality when creating a consulting agreement.
Signing requirements
To ensure that a consulting agreement will hold up in court, many attorneys include signing requirements, such as signing in the presence of witnesses or using a licensed notary.
Consultants vs employees: key differences
Though they often work side-by-side to reach your company's goals, there are some important differences between employees and consultants that every business should keep in mind:
Compensation and benefits
Unlike regular employees, consulting work is typically charged on an hourly or per-project basis. Also, independent contractors aren't offered traditional employee benefits, such as health insurance or paid time off.
Still, many consultants calculate their rates to account for this loss of employee benefits and extra taxes, which is important to keep in mind when negotiating their contracts.
Job duties and duration
While their job duties may overlap with those of their client's employees, consultants are often meant to temporarily supplement an in-house team for a certain project. This also means that consultant agreements usually contain set beginning and end dates, unlike open-ended employee agreements.
Tax responsibilities
While it often comes with impressive freedom and other benefits, independent contractor status isn't without its share of extra responsibilities. Specifically, independent contractors pay more than traditional employees during tax season in order to account for the portion usually covered by an employer.
Compensation and benefits
Unlike regular employees, consulting work is typically charged on an hourly or per-project basis. Also, independent contractors aren't offered traditional employee benefits, such as health insurance or paid time off.
Still, many consultants calculate their rates to account for this loss of employee benefits and extra taxes, which is important to keep in mind when negotiating their contracts.
Job duties and duration
While their job duties may overlap with those of their client's employees, consultants are often meant to temporarily supplement an in-house team for a certain project. This also means that consultant agreements usually contain set beginning and end dates, unlike open-ended employee agreements.
Tax responsibilities
While it often comes with impressive freedom and other benefits, independent contractor status isn't without its share of extra responsibilities. Specifically, independent contractors pay more than traditional employees during tax season in order to account for the portion usually covered by an employer.
How independent consultants can supercharge your business
For businesses looking to grow, pivot, or tackle projects with defined goals, hiring business consultants on a contract basis can be a game-changer. Typically, such consulting services can offer your company advantages such as:
Specialized expertise
No matter how skilled or dedicated they may be, even the best in-house team will need niche expertise from time to time. By hiring an experienced, independent business consultant, you gain access to exactly the expertise you need most---without having to take on another full-time employee.
Objective analysis
Even the most self-aware companies can sometimes fall prey to blind spots, especially when those blind spots relate to passion projects or longstanding tradition. A consultant's services, however, come with a fresh perspective and the ability to objectively analyze your business, the issues it faces, and what needs to happen to find a solution.
Training and upskilling
More and more, companies are turning to business consultants to help upskill their employees. On top of the expertise and insights they bring, business consultants tasked with training your team often use cutting-edge methods to yield improvements much faster than traditional in-house training programs or human resources.
Expansion advice
When companies expand into new markets, they often need a temporary burst of resources and expertise to do so efficiently. In many cases, hiring the right consulting service can mean the difference between expanding successfully or struggling to compete when you need to most.
Compliance efforts
For businesses that operate in highly regulated fields, hiring compliance experts via consulting contracts can help avoid legal pitfalls, penalties, and even lawsuits. And with state and federal regulations changing yearly for many industries, hiring a consulting firm that stays up-to-date can be a crucial investment.
For businesses looking to grow, pivot, or tackle projects with defined goals, hiring business consultants on a contract basis can be a game-changer. Typically, such consulting services can offer your company advantages such as:
Specialized expertise
No matter how skilled or dedicated they may be, even the best in-house team will need niche expertise from time to time. By hiring an experienced, independent business consultant, you gain access to exactly the expertise you need most---without having to take on another full-time employee.
Objective analysis
Even the most self-aware companies can sometimes fall prey to blind spots, especially when those blind spots relate to passion projects or longstanding tradition. A consultant's services, however, come with a fresh perspective and the ability to objectively analyze your business, the issues it faces, and what needs to happen to find a solution.
Training and upskilling
More and more, companies are turning to business consultants to help upskill their employees. On top of the expertise and insights they bring, business consultants tasked with training your team often use cutting-edge methods to yield improvements much faster than traditional in-house training programs or human resources.
Expansion advice
When companies expand into new markets, they often need a temporary burst of resources and expertise to do so efficiently. In many cases, hiring the right consulting service can mean the difference between expanding successfully or struggling to compete when you need to most.
Compliance efforts
For businesses that operate in highly regulated fields, hiring compliance experts via consulting contracts can help avoid legal pitfalls, penalties, and even lawsuits. And with state and federal regulations changing yearly for many industries, hiring a consulting firm that stays up-to-date can be a crucial investment.
The dangers of misclassifying employees
When a company labels a worker a "freelancer" but treats them like an employee, they run the risk of employee misclassification---something that can result in serious legal issues. While the nature of such misclassifications often means that they're judged on a case-by-case basis by authorities, coming down on the wrong side of such a judgment can mean penalties such as:
Back-taxes
In many cases, companies that misclassify employees as independent business consultants or other freelancers may be required to pay back taxes, including income tax withholding, Social Security taxes, and Medicare taxes.
Often, these back-taxes accumulate for as long as an employee is considered misclassified and can result in a significant bill from the IRS.
IRS penalties and fees
Because back taxes are, by definition, paid late, they often come alongside penalties, interest, and fees. On top of the number already owed for the taxes themselves, this can make a bad situation even worse for employers.
Potential business audits
Costly, time-consuming, and frustrating, IRS audits and inquiries are two of the things companies try hardest to avoid. Misclassification of employees---especially done repeatedly---can trigger these audits and subject your business to increased scrutiny and, potentially, other penalties.
Owed benefits
Misclassified employees are entitled to owed benefits such as health insurance, contributions to retirement accounts, paid leave, maternity or paternity benefits, and more.
When a company labels a worker a "freelancer" but treats them like an employee, they run the risk of employee misclassification---something that can result in serious legal issues. While the nature of such misclassifications often means that they're judged on a case-by-case basis by authorities, coming down on the wrong side of such a judgment can mean penalties such as:
Back-taxes
In many cases, companies that misclassify employees as independent business consultants or other freelancers may be required to pay back taxes, including income tax withholding, Social Security taxes, and Medicare taxes.
Often, these back-taxes accumulate for as long as an employee is considered misclassified and can result in a significant bill from the IRS.
IRS penalties and fees
Because back taxes are, by definition, paid late, they often come alongside penalties, interest, and fees. On top of the number already owed for the taxes themselves, this can make a bad situation even worse for employers.
Potential business audits
Costly, time-consuming, and frustrating, IRS audits and inquiries are two of the things companies try hardest to avoid. Misclassification of employees---especially done repeatedly---can trigger these audits and subject your business to increased scrutiny and, potentially, other penalties.
Owed benefits
Misclassified employees are entitled to owed benefits such as health insurance, contributions to retirement accounts, paid leave, maternity or paternity benefits, and more.
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