How to employ independent contractors on a recurring basis?

In my startup I plan to hire independent contractors for recurring ad-hoc jobs. If freelancers are usually not business entities and do not have a possibility to give an invoice, how can I legally employ them (i.e. pay them) for recurring ad-hoc jobs?

If you are in the USA, you can simply just 1099 these folks based on the work they perform for you. Even if they are offshore you can use them and take advanatage of the tax write off for their costs.

The trouble with what you are trying to do is good freelancers are usually booked up way ahead of time. And if you find someone who is good on the freelancer websites (odesk, etc), they usually become super busy once they get a good reputation.

What I have realized after years of offshoring is to find either an offshore company who has stock talent, or make the investment to recruit directly offshore. This takes more effort but pays off in the long run. As for paying them, you have to research the laws of your home country and the host country of the freelancer.

I am in the USA and use freelancer in Ukraine. Ukraine has very friendly business laws for this type of work, and the engineering talent is pretty strong.

Well, you will definitely need to get invoices from them. Have them track their hours in a tool like Harvest, and then send you an invoice once per week.

That scenario can work well for projects (even small ones) but for very small miscellaneous work, the overhead of tracking the tasks is too much. You may be better off with a part-time employee.

Or, you can go through a site like Elance, Freelancer.com, or ODesk. Those sites hold your payment in escrow and send it to the freelancer when the work is complete.

Not sure what the rules are in the EU, but in the US the difference between employee and contractor is primarily a tax definition. It is definitely a gray line issue as opposed to black and white. My company has no employees other than me, but I use the services of several different people to get work done. On occasion I hire a virtual assistant, graphic designers, content writers, developers, etc. The main difference is I don't hire them for anything other than work on a specific project. Each project has predefined parameters, timeframe and budget (or rate). I don't tell them how to get the work done or define what hours they need to be "at work" to complete it. This means the relationship is more of a customer & service provider than employer & employee, which in turn means they are treated as contractors instead of employees.

As for invoicing, whether or not they send me one, I create a record of one for every payment I make. That is simply good accounting. At the end of the year they are sent 1099's. There is one guy who works for me very regularly, and even goes on location at client sites wearing my company logo, but the work is strictly project based and hourly. He is paid by the hour and/or project so that no relationship that could be defined as employer/employee would be implied.

Your contractors don't need to be incorporated to send an invoice. All you need to do is let them know that they need to send an invoice if they want to get paid.