Most flight instructors these days are independent contractors that teach out of a flight school, using their facilities and planes. They may also do other instruction outside of that particular flight school environment such as give a biannual flight review to a pilot with his/her own plane, teach at another airport or school or act as a ground instructor in various situations.
One thing that both the independent flight instructor and flight schools should keep in mind is the legal boundary and relationship between the two. Keep in mind that as I am not an attorney, in no way does this constitute legal advice but rather a few common areas that both parties should consult with one should there be questions. An independent contractor is just that, independent and not an employee. They may have certain arrangements with the flight school in their contract such as fees for using the facilities or possible a guideline of how to best represent the schools professional appearance (again guideline not mandatory).
One example of a big no no was a flight school requiring their independent CFI’s to attend mandatory meetings with the employees as well as mandatory uniforms. Right there the IRS would deem the CFI’s no longer independent but an employee in which that school would now be obligated to pay taxes on their wages.
Being an independent CFI is a great business to have and there is no reason both instructors and flight schools can’t reach reasonable agreements. It can be a great relationship for both as the schools provide the physical tools for the flight instructor and student and the flight instructor provides valuable teaching skills, a great reputation and most importantly, has the ability to bring as many students to train there as they would like, thus creating their own stream of income and hours.
Here’s a great write up at Flight School Business if you want more information: http://bit.ly/fdirxe