The tests applied by the IRS and by state agencies look at the substance. Who controls how and when the work is done. Who supplies the tools and equipment. Whether the person works for other clients. How permanent the arrangement is. Whether the work is central to your business or peripheral to it. A person you direct daily, who works only for you, using your systems, on your core work, is an employee regardless of what the agreement says.
Nevada applies its own test alongside the federal one, and the two do not always align. That matters because a person can be a contractor for one purpose and an employee for another, and the state consequences frequently arrive first through unemployment insurance and workers compensation.
The practical differences run in both directions. A contractor carries no payroll taxes, no employer contributions, and no ongoing obligation, which makes the total cost predictable and the arrangement easy to end. What you give up is control: you can specify the outcome but not dictate the method or the hours, and attempting to do both is exactly what converts the relationship into employment in the eyes of an examiner.
An employee costs meaningfully more than the salary once payroll taxes, workers compensation, and unemployment insurance are included, and creates obligations that begin immediately rather than at some later size. In exchange you get to direct the work, set the hours, build institutional knowledge that stays, and ask for things that were not specified in advance.
For a first hire the honest answer is usually to start with contract work on a defined project, because it tests the relationship and the workload without a commitment that is difficult to reverse. Convert to employment when the work becomes ongoing and you find yourself wanting to direct it, which is the point at which continuing to call it contracting stops being defensible.
Put the arrangement in writing either way, and make the document describe what actually happens rather than what is convenient. This is general information rather than legal advice, and a first hire is worth an hour with somebody qualified.
Be careful about a contractor who works only for you over a long period, since that arrangement drifts toward employment without anybody deciding it should. The exclusivity and the duration are exactly what an examiner looks at, and a relationship that started as a defined project can quietly become something else across a year of continuous work.