Exactly this - there are differences in what you can require from someone on employment contract and external contracting company (whether that company is single person or not) and effectively making one category into another without actually reclassifying (like employing as employee) is considered fraud in most places.

Can you give an example?

There are possible frauds from both employer and employee side, but I will list some common "landmines" of miss-classification, though beware that they are picked across different jurisdictions and I do not remember which apply where. All examples are possible items that can be decided to be part of misclassification, usually from contractor to effective employee:

- requiring specific dress code is non-enforceable on contractors in many places

- contractor is not required to provide specific person to fulfill the job, only a person of appropriate qualifications (it's valid for there to be a check on those qualifications)

- in UK case, contractor might be asked to prove that they have a substitute to work in their place!

- [Poland, possibly other] having only one client is not illegal, but can be grounds for investigations and if it's your only client where you work for equivalent of full-time job, it will be evidence for tax fraud

- You can not enforce working hours on contractors in most jurisdiction, only specific deliverables (taking part of work meetings is deliverable, requiring availability in general of specific person at specific times can be grounds for reclassification)

- above is often linked with "gig economy" - rules regarding "contractors" needing to pick up available jobs etc. are often considered illegal skirting of employment law.

As sibling comment mentioned, more is available from your local (too) friendly search engine. And employment lawyers and HR specialists.

Your favorite web search engine is your friend here.