WHEN LONGTIME AD MAN Tom Simons launched Partners + Simons, a marketing communications firm in Boston nearly two decades ago, he wanted to build an agency "free of organizational and administrative hoops." He also wanted to figure out the best way to compete with traditional firms in an industry with shrinking profit margins.

His solution? Hire independent contractors.

While Simons generally hires people in creative fields such as graphic design, illustration and program development, independent contractors, or "freelancers" as they're often dubbed, can work in any number capacities. From lawyers and accountants to consultants and plumbers, there are about 10.3 million independent contractors in the United States, comprising 7.4% of the work force, according to the Bureau of Labor Statistics. Since freelancers are considered self-employed — not employees — Stephen Fishman, a tax attorney in San Francisco and author of Nolo's "Working With Independent Contractors" says that hiring these types of workers provides a number of benefits.

For example, Fishman says, employers can typically avoid paying Social Security and Medicare taxes along with unemployment and workers' compensation insurance when they hire freelancers. They don't need to withhold federal and state income taxes from freelancer paychecks either. And since freelancers aren't technically employees, employers aren't obligated to offer them retirement benefits, health insurance or other benefits.

Beyond the savings, however, Simons embraced the freelance employment model during his business's early days mainly for its simplicity. "People with independent expertise would come together and then disband after a project," he says, comparing the experience to "that's a wrap" on a movie set. "It felt very much like the motion picture industry."

Though, as time went on and some freelancers didn’t fulfill their end of the bargain, Simons began instituting contracts and other freelance vetting strategies. Because while hiring freelancers can provide ample opportunity to save and potentially reduce some management headaches, there are a number of risks involved as well. For example, Simons says, freelancers might miss deadlines or simply disappear when you need them.

In spite of these drawbacks, start-up business owners who typically have fewer resources than well-established businesses should consider hiring these untethered workers. Just be sure to vet them properly, say small-business consultants and entrepreneurs who've worked with freelancers. Here's our guide to the process.

Finding Freelancers

Finding freelancers used to mean putting an ad in the paper, tapping a former employee or getting recommendations from colleagues. Today, however, employers can typically search for freelancers online and post projects at various web sites for free. For example, the Freelancers Union provides a substantial database of freelancers across the country. Employers can post projects at craigslist. Mediabistro.com, iFreelance and Guru.com allow business owners to rate freelancers they've worked with. Freelancers can also provide feedback on whether or not a company operated professionally and paid on time.

Various industries may have their own marketplaces as well. For instance, employers looking for designers can check out Freelance Designers. In addition to finding freelancers in one’s local area, sites such as Serebra Connect offer to match skilled freelancers in developing countries with work opportunities in the U.S.

Background Check

No matter if you connect via the web or through a friend, hiring a freelancer is "the same as hiring anyone," says Fishman. Make sure to check out at least three professional references. Ask if they were on time and easy to work with. Find out if freelancers communicated well, understood projects and how much they charged.

You'll also want to look closely at resumes, inspect portfolios and maybe even set up an interview. If no work samples are available, meeting with prospective hires is a necessity, says Laurel Touby, founder of Mediabistro.com. She adds that it's also important to ask freelancers critical questions such as "have you done this type of project before? What are your rates? Are you available?"

If you're dealing with a newbie freelancer, he or she likely won't have much of a track record to examine. In this situation, you might consider offering a test that if completed well and on-time might turn into paid work. Glenn Cain, the founder of Yndigo Translations, a legal translation shop in Brooklyn, N.Y., works almost exclusively with freelance translators. To break in new translators, Cain offers them an easier project for less than he might pay a more experienced translator and bumps up the deadline. "I give them a couple pages to do, and if it's awful I still have time to bring in another translator to fix it," he says.

Get It in Writing

Depending on your industry, it might be wise to require that freelancers sign confidentiality agreements, Cain suggests. In the legal translation business, he says, freelancers often translate sensitive information. Keeping that information private is a priority, he says.

Similarly, business owners might consider having freelancers sign contracts. Contracts can potentially protect employers from "my word against yours" legal situations and make sure everyone's on the same page in terms of the project, says Fishman. A contract, he says, should include a description of the job, how much a freelancer will receive and when he or she will get paid. "Contracts should also show that you’re hiring an independent contractor," says Fishman. As such, he recommends stating explicitly "that you won't provide benefits or pay taxes." (A sample contract is available here.)

Keep in mind that the Internal Revenue Service imposes strict penalties against employers who misrepresent employees as independent contractors. Fishman recommends gathering materials that confirm a freelancer’s independent status. For example, collect ads and snap shots of web site profiles showing freelancers advertising their services. That way, if IRS auditors do come knocking, you’ll have proof that you hired an independent worker, not an employee.

("Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.)

Other recent Starting Up columns:

• Starting Up: Nonprofits Launch Social Sidelines
• Starting Up: Nonprofit Vs. For-Profit Social Ventures