Independent Contractor Resources

Independent Contractor Resources

As we represent many current and new business owners in Colorado, we understand that independent contractors can be a benefit and a detriment to a business, particularly during a business sale. We have created a three-part series that will describe independent contractors, how they affect a business sale and how to make sure you are following regulations to avoid penalties or problems during a sales transaction. In Part 3 of our series, we have provided resources to ensure you are classifying your workers properly to avoid any penalties.

In Part 2 of our series, we described how having independent contractors (IC) as workers within a business can affect a business sale. It is essential as a business owner to understand the effects IC's have on a business sale so you take the necessary actions. 

The Colorado Supreme Court recently ruled that there exists more than a single factor that determines whether a worker is an IC rather than an employee. Courts and agencies should consider nine factors in the court ruling that are based on the Department of Labor and Employment regulations. If a business owner has workers that are IC's, they can provide evidence based upon the nine factors below. The employer must prove that they did not:

  1. Require the worker to work exclusively for the putative employer; except that the worker may choose to work exclusively for that business for a finite period of time specified in the independent contractor agreement;
  2. Establish a quality standard for the worker; except that the putative employer can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the worker as to how the work will be performed;
  3. Pay a salary or hourly rate but rather a fixed or contract rate;
  4. Terminate the worker during the contract period unless the worker violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
  5. Provide more than minimal training for the worker;
  6. Provide tools or benefits to the worker; except that materials and equipment may be supplied;
  7. Dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
  8. Pay the worker personally but rather makes checks payable to the trade or business name of the worker; and
  9. Combine the putative employer's business operations in any way with the worker's business, but instead, maintains such operations as separate and distinct.

The employer can also use six other factors that aren't specifically considered by the Department, but which are ones that the Court considered relevant to whether the worker is an independent contractor or not. These factors include whether the worker:

  1. Maintains an independent business card, listing, address, or telephone;
  2. Has a financial investment in the project or risks suffering a loss;
  3. Uses his or her own equipment on the project;
  4. Sets the price for performing the project;
  5. Employs others to complete the project;
  6. Carries liability insurance.

All in all, an employer could be in trouble if they're violating several of the above factors. Additionally, Colorado law is heavily involved with the regulation of small businesses within the state, therefore, it is very important to comply with these fifteen factors. Please keep in mind that Transworld Business Advisors is not giving legal advice. If you're concerned that you are in violation you should talk to a lawyer.


Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. 

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