Freelance Subcontractor Agreement: What to Include and Why You Need One

The contract you skip when you hire a subcontractor is the one you wish you had when the project goes sideways.

This comes up more often than people expect. You win a project larger than you can handle alone. A client needs a skill adjacent to yours. You have more work than time. In each case, you are the primary contractor: the client hired you, and you are hiring someone else to fulfill part of the work. That layered arrangement creates real obligations in both directions — and a verbal agreement or an email thread covers almost none of them.

What a freelance subcontractor agreement must include

• Scope of work: A specific description of what the subcontractor will deliver, in what format, by what deadline. Vague scope in a subcontractor agreement creates the same problems as vague scope in your client contract — but now you are absorbing the cost.
• Payment terms: The rate (hourly or per deliverable), when invoices are due, and what triggers payment. Avoid language that makes the subcontractor's payment contingent on your client paying you first — most jurisdictions treat that as unenforceable, and it puts unreasonable risk on the sub.
• IP and work product ownership: All deliverables should be assigned to you or directly to your client. Without this clause, the subcontractor retains copyright by default — which means your client may not legally own what they paid for.
• Confidentiality: The subcontractor will see client names, project details, and possibly sensitive business information. A confidentiality clause keeps that information where it belongs.
• Deliverable acceptance: Who reviews and approves the subcontractor's work? What is the revision process? What happens if the deliverable does not meet spec?
• Termination: Each party's right to end the agreement early, with required notice and payment for work completed up to that point.
• Independent contractor status: A clause confirming the subcontractor is not your employee — they set their own hours, use their own tools, and are responsible for their own taxes.

Sample language for the IP assignment clause

IP ownership is the clause most freelancers skip and most often regret. Here is language that covers the essentials — adjust it with a lawyer if the project involves significant IP value:

• Subcontractor assigns to [Your Name/Company] all right, title, and interest in any work product created under this agreement, including all copyrights, patents, trade secrets, and other intellectual property rights. To the extent any work product does not qualify as a work made for hire under applicable law, Subcontractor irrevocably assigns all such rights upon creation. Subcontractor retains no license to use, reproduce, or distribute any work product created under this agreement without prior written consent.

Tax obligations: the 1099 you have to send

If you pay a subcontractor $600 or more in a calendar year, you are required to issue them a 1099-NEC form by January 31 of the following year. Before the project starts, collect a signed W-9 from anyone you expect to pay at or above that threshold. The W-9 gives you the legal name, address, and taxpayer identification number you need to file correctly.

Payments to a subcontractor structured as a corporation — C-corp or S-corp — are generally exempt from the 1099-NEC requirement. Collect the W-9 anyway; it documents the exemption and protects you if the IRS ever asks.

How to handle billing and markup

You can pay the subcontractor at a negotiated rate and bill the client at your own rate, keeping the difference as margin. Most freelancers do this and do not disclose the arrangement unless asked. Others pass the subcontractor cost through to the client as a line item and charge a separate coordination or project management fee on top.

Either model works. The one to avoid: billing subcontractor hours at your full rate in a context where the client reasonably expected to work only with you directly. Including a line in your primary contract stating that you may engage subcontractors to fulfill the work — without naming anyone — is enough to keep the arrangement above board.

Four things not to skip

• Do not skip the written agreement because the subcontractor is a friend or a collaborator you have worked with before. Familiarity makes the conversation easier, not unnecessary.
• Do not make payment contingent on receiving client payment. It reads as a protective clause; in practice it is usually unenforceable and puts strain on the working relationship.
• Collect the W-9 before the project starts, not after. Getting one retroactively — or after year-end — is slower and harder than it needs to be.
• Do not assume your client contract's IP clause extends to your subcontractor. Your agreement with the client and your agreement with the sub are separate documents. One does not substitute for the other.