Does an independent contractor need a business license?

Now, that’s all changed: according to a McKinsey study, in 2022, 58 million Americans—equivalent to about 36% of the workforce—identified themselves as independent contractors. This is a nearly 10% jump from self-employed workers who made up the gig economy in 2016, according to the same survey.

There are many benefits to working as an independent contractor. Not only do you have the freedom to set your schedule and, often, work remotely from wherever you wish, but you can sometimes earn more money before taxes—and you get to be your own boss. 

However, it’s also fraught with complexities. For instance, what exactly do the terms “independent contractor” and “1099 contractor” mean in the eyes of the law? And, if you’re working as an independent contractor in the US, do you need a business license? What if you’re a citizen of another nation?

Here, we’ll address some common questions about independent contractor business licenses, as well as the basic steps you should take to set yourself up as a self-employed worker, and more.

Foreign self-employed workers and independent contractor business licenses

The pandemic resulted in the explosion of the gig economy and made remote work arrangements a common way to do business. It also allowed companies to look for and hire talent anywhere in the world; similarly, freelancers could now seek out the right job in any country, not just their own. 

Hiring a foreign independent contractor legally and compliantly

For companies, there are numerous benefits to hiring an independent contractor based outside the US. Not only can companies access a wider range of skills find the best person for the job, but currency exchange rates and low labor costs often make it fiscally advantageous for American companies to look outside their nation. 

However, to avoid penalties, fees, and other legal issues, it’s crucial for companies (and contractors) to be wise to the labor laws of both the US and the nation the independent contractor lives in. In our guide, you can learn more about how companies can legally hire independent contractors around the world.

Do foreign independent contractors need business licenses?

Just like American independent contractors, both foreign freelancers and the companies who hire them often wonder if the former needs a business license to operate as an independent contractor. The short answer? The rules vary from country to country. It’s crucial to look up the laws of the nation the independent contractor hails from, as well as those of the country the company is located in. 

Here’s a short list of information about the necessity of independent contractor business licenses for freelancers who are from some nations that commonly work with the US:

• Canada: Generally, as long as the independent contractor operates their business from home and does not see clients, no business license is necessary. However, other documentation and paperwork may be required, depending on what kind of business you run and where it’s located. Check with the Canada Revenue Agency first.

• Australia: Yes. Independent contractors need to apply for an Australian Business Number (ABN), pay the correct taxes, register for separate business taxes, and understand what their fiscal responsibilities are.

• India: Generally, Indian independent contractors do not need a business license or any kind of registration paperwork.

• Mexico: Many non-Mexican citizens move to Mexico to work as freelancers for US-based companies—on tourist visas, and without a business license. The laws surrounding Mexican citizens who are independent contractors are less well understood. You need to do your due diligence in researching the Mexican laws that govern whether or not the worker is considered a contractor or an employee. 

• Philippines: Yes. Filipinos who want to work as independent contractors need to register as such, as well as obtain a taxpayer identification number (TIN) and a Department of Trade and Industry (DTI) certificate.

• Brazil: As long as you’re not subject to the regulations of any of the clients you work for, you’re free to work as an independent contractor in Brazil without a business license.

• Ukraine: Yes, a business license is necessary. Generally, Ukrainian freelancers set themselves up as an “Individual Entrepreneur” (or FOP) and need to fill out the necessary paperwork and tax documents to get started.

Hire contractors compliantly with Rippling

Navigating independent contractor compliance can be complex, but Rippling's global contractor management software simplifies every step—from hiring and onboarding to global payments and compliance. Whether you're working with freelancers in the U.S. or international contractors across 185+ countries, Rippling ensures proper classification, payroll processing, and legal compliance in one seamless system.

Misclassifying workers can lead to fines and legal issues, but Rippling’s 90-second quiz helps businesses determine whether a worker should be classified as an independent contractor or an employee. Once hired, contractors can easily submit invoices, track time, and get paid in their local currency—all while ensuring compliance with local labor laws.

Unlike other solutions that require multiple integrations or manual data entry, Rippling centralizes workforce management. From automating contractor agreements and tax documentation to managing global payments, Rippling helps businesses scale confidently while staying compliant.