Independent contractor in the brokerage context means:

• A. All salespeople must be employees of the broker
• B. Independent contractors always perform all tasks without supervision
• C. The salesperson may be either an employee of the broker or independent contractor; the employment agreement should specify which
• D. The broker must pay payroll taxes for all salespeople

Answer: (C)

Independent contractor status in a brokerage relationship is about the nature of the working arrangement and how control, duties, and compensation are structured. The salesperson can be an employee of the broker or an independent contractor, and the contract should clearly specify which relationship applies. This clarity matters for how commissions are paid, how supervision works, and who handles taxes.

Why this is the best fit: if the contract states the person is an employee, the broker has more control, issues a regular paycheck, and withholds payroll taxes. If the contract designates the person as an independent contractor, the broker typically pays commissions directly and issues a 1099, with the contractor responsible for their own taxes. The key point is not the tasks performed, but the formal relationship and how it’s documented in the agreement.

Other options aren’t correct because: not all salespeople must be employees; there can be independent contractors. Independent contractors can operate under some supervision or guidelines, but they’re not treated the same as employees in terms of control and withholdings. And payroll taxes are not typically the broker’s responsibility for independent contractors.