Why You MUST Have This Agreement
Here's what most founders don't know: under US copyright law, when an independent contractor creates work for you, they own it. Not you. Unless you have a written agreement that says otherwise. This means that without a proper contractor agreement, the developer you paid $20,000 to build your app might legally own the code.
This isn't theoretical. We've seen startups in the Miami tech community discover, mid-fundraise, that they don't actually own their own codebase because they never signed an IP assignment with their original developer. Investors walk away from that immediately.
A contractor agreement does three critical things: (1) it assigns all IP to your company, (2) it defines the scope of work and payment terms, and (3) it establishes that the person is a contractor, not an employee. All three matter. Here's the template.
The Template
This template covers the essential clauses for hiring a freelancer or independent contractor. Customize the bracketed sections.
This Independent Contractor Agreement ("Agreement") is entered into as of [Date] ("Effective Date") by and between:
[Company Name], a [State] [LLC/Corporation] ("Company")
and
[Contractor Full Name / Business Name] ("Contractor")
The Contractor shall perform the services described in Exhibit A (the "Services"), attached hereto and incorporated by reference. The Contractor shall complete the Services according to the milestones and timelines specified in Exhibit A. Any changes to the scope of work must be agreed upon in writing by both parties.
The Company shall pay the Contractor [$ amount] for the Services, payable as follows: [describe payment schedule, e.g., "50% upon execution of this Agreement, 25% upon completion of milestone 1, and 25% upon final delivery"]. Invoices are due within [30 days] of receipt. The Contractor is responsible for all taxes on compensation received.
The Contractor hereby irrevocably assigns to the Company all right, title, and interest worldwide in and to all work product, deliverables, inventions, works of authorship, designs, code, documentation, and other materials created by the Contractor in connection with the Services (collectively, "Work Product"), including all intellectual property rights therein. The Contractor agrees to execute any documents and take any actions reasonably requested by the Company to perfect, evidence, or vest in the Company the rights assigned herein. To the extent any Work Product includes any pre-existing materials of the Contractor, the Contractor grants the Company a perpetual, irrevocable, worldwide, royalty-free license to use such materials as part of the Work Product.
The Contractor agrees to hold in strict confidence all non-public information of the Company, including but not limited to business plans, customer data, financial information, product designs, and technical specifications. This obligation survives termination of this Agreement for a period of [2 years]. The Contractor shall not use any Confidential Information for any purpose other than performing the Services.
The Contractor is an independent contractor and not an employee, agent, or partner of the Company. The Contractor is responsible for their own taxes, insurance, and benefits. The Contractor controls the manner and means of performing the Services, subject to the project specifications and deadlines. The Contractor may work for other clients during the term of this Agreement, provided such work does not conflict with the Services or violate the confidentiality provisions herein.
This Agreement begins on the Effective Date and continues until the Services are completed, unless terminated earlier. Either party may terminate this Agreement with [14 days] written notice. Upon termination: (a) the Company shall pay for all Services completed to the date of termination; (b) the Contractor shall deliver all Work Product completed to date; (c) all IP assignment and confidentiality provisions shall survive.
The Contractor warrants that: (a) the Work Product will be original and will not infringe any third-party intellectual property rights; (b) the Contractor has the right to enter into this Agreement; (c) the Services will be performed in a professional and workmanlike manner. The Contractor shall indemnify the Company against any claims arising from a breach of these warranties.
Neither party shall be liable for indirect, incidental, special, or consequential damages. The Contractor's total liability under this Agreement shall not exceed the total compensation paid under this Agreement.
This Agreement is governed by the laws of the State of [State, e.g., Florida]. Disputes shall be resolved in the courts of [County, e.g., Miami-Dade County].
COMPANY:
Signature: ___________________________
Name: [Name]
Title: [Title]
Date: ___________________________
CONTRACTOR:
Signature: ___________________________
Name: [Name]
Date: ___________________________
Employee vs Contractor: Don't Get This Wrong
Misclassifying an employee as a contractor is one of the most expensive mistakes a startup can make. The IRS, state tax agencies, and labor departments all take this seriously. Penalties include back taxes, overtime payments, benefits, and fines.
The key factors that determine classification:
Behavioral control. Do you control how the work is done, or just what the outcome should be? Employees are directed step-by-step. Contractors control their own methods. If you're telling your "contractor" what hours to work, which tools to use, and how to approach each task, they might actually be an employee.
Financial control. Does the worker have a significant investment in their own equipment? Do they serve multiple clients? Can they realize a profit or loss? Contractors typically have their own tools, multiple clients, and business expenses. A "contractor" who works exclusively for you, uses your equipment, and has no other clients looks a lot like an employee.
Relationship type. Is there a written contract? Are benefits provided? Is the work ongoing or project-based? Contractors work on defined projects with clear deliverables. Employees have ongoing roles with general responsibilities. Many founders here in Miami and across South Florida hire freelancers for specific development sprints -- that's a legitimate contractor relationship. Hiring someone full-time for an indefinite period and calling them a contractor is not.
The IP Assignment Is Non-Negotiable
Section 3 of the template -- IP Assignment -- is the single most critical clause. Without it, you're paying someone to create intellectual property that they own. Here's what the IP assignment covers:
All work product. Code, designs, documentation, databases, APIs -- everything created during the engagement belongs to your company.
Pre-existing materials. If the contractor uses their own libraries or frameworks, they grant you a license to use them as part of the deliverables. This prevents situations where the contractor says "you can't use that component because it's my pre-existing IP."
Future cooperation. The contractor agrees to sign any additional documents needed to perfect your ownership. This matters for patent applications or if you need to prove ownership during due diligence.
If you're still exploring the idea phase, you might also need a mutual NDA or an app idea NDA before formalizing the contractor relationship. And if you're bringing someone on as a co-owner rather than a contractor, use a co-founder agreement instead.