INDEPENDENT CONTRACTOR AGREEMENT
State of South Dakota
Table of Contents
- Parties
- Recitals
- Scope of Services
- Term and Termination
- Compensation and Payment
- Independent Contractor Status
- Tax Obligations
- No Employee Benefits
- Insurance
- Intellectual Property
- Confidentiality
- Non-Competition and Non-Solicitation
- Indemnification
- Dispute Resolution
- South Dakota-Specific Notices
- General Provisions
- Signatures
1. PARTIES
This Independent Contractor Agreement ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and between:
Company/Client:
Name: [________________________________]
Address: [________________________________]
City: [________________________________] State: South Dakota ZIP: [____]
EIN/Tax ID: [________________________________]
Independent Contractor:
Name: [________________________________]
DBA (if applicable): [________________________________]
Address: [________________________________]
City: [________________________________] State: [____] ZIP: [____]
SSN/EIN: [________________________________]
2. RECITALS
WHEREAS, Company desires to engage Contractor to perform certain services; and
WHEREAS, Contractor represents that Contractor is customarily engaged in an independently established trade, occupation, profession, or business;
NOW, THEREFORE, in consideration of the mutual covenants herein, the Parties agree as follows:
3. SCOPE OF SERVICES
3.1. Contractor shall perform the following services ("Services"):
[________________________________]
3.2. Deliverables: [________________________________]
3.3. Contractor shall determine the manner, method, and means of performing the Services.
4. TERM AND TERMINATION
4.1. Term. This Agreement begins on [__/__/____] and continues through [__/__/____].
4.2. Termination for Convenience. Either Party may terminate upon [____] days' written notice.
4.3. Termination for Cause. Either Party may terminate immediately upon material breach if not cured within [____] days.
4.4. Effect of Termination. Contractor delivers completed work and is paid through termination date.
5. COMPENSATION AND PAYMENT
5.1. Compensation.
☐ Fixed fee of $[________________________________]
☐ Hourly rate of $[________________________________] per hour
☐ Milestone-based payments per Exhibit A
☐ Other: [________________________________]
5.2. Invoicing. Contractor shall submit invoices [________________________________].
5.3. Payment Terms. Payment due within [____] days of valid invoice.
5.4. Expenses. Contractor bears all expenses unless pre-approved. Pre-approved: [________________________________]
6. INDEPENDENT CONTRACTOR STATUS
6.1. Classification. Contractor is an independent contractor. No employment, agency, joint venture, or partnership is created.
6.2. South Dakota Two-Prong Test. Under SDCL § 61-1-11, services for wages are employment unless BOTH prongs are satisfied:
Prong 1 — Freedom from Control:
☐ Contractor has been and will continue to be free from control or direction over the performance of Services, both under this Agreement and in fact
Prong 2 — Independently Established Business:
☐ Contractor is customarily engaged in an independently established trade, occupation, profession, or business
6.3. Supporting Factors (Common-Law Test):
☐ Contractor controls when, where, and how work is performed
☐ Contractor provides own tools, equipment, and supplies
☐ Contractor sets own schedule
☐ Contractor has right to hire assistants or subcontractors
☐ Contractor is free to work for other clients
☐ Contractor has significant investment in own business
☐ Contractor has opportunity for profit or loss
☐ Contractor maintains own business entity and licenses
☐ The relationship is project-based, not indefinite
6.4. No Control. Company shall not control the manner, method, or means of performance.
7. TAX OBLIGATIONS
7.1. Contractor is solely responsible for all federal and local taxes. Note: South Dakota has no state income tax.
7.2. Company shall not withhold taxes.
7.3. Company shall issue Form 1099-NEC for payments of $600 or more.
7.4. Contractor shall provide a W-9 prior to first payment.
8. NO EMPLOYEE BENEFITS
8.1. Contractor is not entitled to employee benefits, including health insurance, retirement, paid leave, workers' compensation, or unemployment insurance.
8.2. Contractor is responsible for personal coverage.
9. INSURANCE
9.1. Contractor shall maintain at Contractor's expense:
☐ General liability insurance: $[________________________________] minimum
☐ Professional liability insurance: $[________________________________] minimum
☐ Workers' compensation insurance (if Contractor has employees)
☐ Commercial auto insurance (if applicable)
9.2. Certificates of insurance upon request.
10. INTELLECTUAL PROPERTY
10.1. Work Product.
☐ Owned by Company as work made for hire with full assignment
☐ Licensed to Company per: [________________________________]
☐ Owned by Contractor with perpetual non-exclusive license to Company
10.2. Pre-Existing IP. Contractor retains rights; grants non-exclusive license.
10.3. Assignment. Contractor assigns all rights not qualifying as work made for hire.
11. CONFIDENTIALITY
11.1. Definition. "Confidential Information" means all non-public information disclosed by Company.
11.2. Obligations. Maintain strict confidence, no disclosure without consent, use solely for Services.
11.3. Exceptions. Publicly available, previously known, independently developed, or legally required.
11.4. Duration. Survives for [____] years. Trade secrets protected under the South Dakota Uniform Trade Secrets Act (SDCL § 37-29-1 et seq.).
12. NON-COMPETITION AND NON-SOLICITATION
12.1. Non-Competition. During the term and for [____] months after termination, Contractor shall not engage in competing activities within [________________________________].
12.2. Non-Solicitation. During the term and for [____] months after termination, Contractor shall not solicit Company's clients or employees.
12.3. Reasonableness. Restrictions are reasonable in time and geography per SDCL § 53-9-11.
13. INDEMNIFICATION
13.1. Contractor shall indemnify, defend, and hold harmless Company from claims arising from: (a) performance; (b) breach; (c) negligence or misconduct; (d) claims of employment status.
13.2. Company shall indemnify Contractor from Company's negligence or misconduct.
14. DISPUTE RESOLUTION
14.1. Governing Law. Governed by South Dakota law.
14.2. Mediation. Parties shall first attempt mediation in [________________________________] County, South Dakota.
14.3. Arbitration / Litigation.
☐ Binding arbitration under AAA rules in [________________________________], South Dakota.
☐ Jurisdiction in [________________________________] County Circuit Court, South Dakota.
14.4. Attorneys' Fees. Prevailing party entitled to reasonable fees and costs.
15. SOUTH DAKOTA-SPECIFIC NOTICES
15.1. Two-Prong Test. South Dakota applies a two-prong test under SDCL § 61-1-11 for unemployment insurance. Both prongs (freedom from control AND independently established business) must be satisfied. The statute creates a presumption of employment that the employer must rebut.
15.2. Common-Law Test. For general purposes and workers' compensation, South Dakota also follows the IRS common-law control test examining the totality of the relationship. The South Dakota Supreme Court has addressed the employee-vs-IC distinction, focusing on control over details and means of work.
15.3. No State Income Tax. South Dakota does not impose a state income tax, simplifying tax obligations for contractors. However, federal self-employment tax and income tax obligations remain.
15.4. Workers' Compensation. Under SDCL § 62-1-2, independent contractors are generally excluded from workers' compensation coverage. Misclassification exposes the company to direct liability.
15.5. Misclassification Penalties. Employers who misclassify workers face: (a) retroactive unemployment insurance contributions plus interest and penalties; (b) workers' compensation liability; (c) federal tax consequences.
15.6. Delivery Facilitation. SDCL § 61-1-11.1 provides specific provisions for delivery facilitation contractors using digital platforms, classifying them as independent contractors if statutory criteria are met.
16. GENERAL PROVISIONS
16.1. Entire Agreement. Complete agreement.
16.2. Amendments. Written and signed by both Parties.
16.3. Severability. Invalid provisions severed.
16.4. Notices. Written to addresses above.
16.5. Assignment. Not assignable without consent.
16.6. Waiver. No waiver constitutes future waiver.
16.7. Counterparts. Executable in counterparts.
17. SIGNATURES
IN WITNESS WHEREOF, the Parties execute this Agreement as of the Effective Date.
COMPANY/CLIENT:
Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]
INDEPENDENT CONTRACTOR:
Signature: [________________________________]
Printed Name: [________________________________]
Title/DBA: [________________________________]
Date: [__/__/____]
EXHIBIT A — STATEMENT OF WORK
[________________________________]
Sources and References:
- SD DLR — Labor and Employment Laws 2025-2026
- SDCL § 61-1-11 — IC Exemption
- Davenport Evans — Employee v. IC Distinction
- SDCL § 53-9-11 — Non-Compete Agreements
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