An independent contractor is someone who offers his or her services to the public. If the payer has the right to direct or control the result of the work, not how to do the work, then the individual is an independent contractor. Some examples of persons who are often independent contractors are accountants, carpenters, doctors, and lawyers, but whether these people are independent contractors still depends on the facts of each case.

NOTE: Employees who retire from a position and return to work for that employer are not independent contractors. In such cases, these workers have been misclassified.

A sole proprietor is someone who owns an unincorporated business. If the sole member of a domestic limited liability company (LLC) elects to treat the LLC as a corporation, he or she is not a sole proprietor.

A trade or business is generally an activity carried on to make a profit. The facts and circumstances of each case determine whether an activity is a trade or business. One does not need to make a profit to be in a trade or business as long as there is a good faith profit motive and ongoing efforts to further the interests of the business activity.