We have all probably filled out some form asking about our employment. Most of us know the answer to this question: we choose one of two options: part-time or full-time. Many people work full-time and get all the benefits, while others make an hourly wage. There are some gig economies. In that case, the answer may not be straightforward.
While you might be inclined to check the box for self-employed, it is still important to determine if your selections are correct.
This article will help you to understand the differences between a freelancer or self-employed individual. Although these terms are often used interchangeably, it is important to know the differences between them.
Understanding the differences will allow you to set realistic goals, plan your work and establish a professional identity.
Key Differences: FREELANCE VS. SELF-EMPLOYED
Freelancers work for multiple clients/companies at once. Instead of earning a monthly salary or filling out work hours, you can sell your time/services hourly or per project.
The term self-employed is a formal description of someone who works for himself. Different people have different definitions of self-employment. If you fall into one of these categories, you will be considered self-employed.
A sole proprietor, or an independent contractor can own a business.
Partner with people who run a business.
You’re in business for your own profit. This includes part-time or full-time businesses.
If you decide to set your own hours and charge for work, you can be considered self-employed.
You might argue that this definition includes freelancers. Right? It isn’t always true. Self-employment can also be used for freelancers. These terms don’t necessarily mean the same thing.
Let’s take a look at the differences between them:
FREELANCERS DO NOT WORK FOR ANYONE
Although freelancers have the ability to set their own rates and work hours, they still work for another company. They sign contracts and agree on terms set by the company or individual.
A self-employed person who owns a business doesn’t need to sign contracts that were created by another. They often sell in a consistent way to customers.
FREELANCERS DESIRE TO WORK ALONE
Self-employed individuals usually have a team that works for them. This helps them to expand their business horizons. It is not a legal definition, but it is an important distinction between self-employed individuals and freelancers. Freelancers work solo and do most of their work themselves.
FREELANCERS CAN GET A DAY JOB
Many people have a job, but they also do freelance work. This is actually how most people start. Why not? This is a great way for you to follow your passions, diversify your income stream and try out the waters in low-risk ways. After you feel confident that freelance work is right for you, you can transition to being a full-time independent contractor.
Self-employed people will only work for themselves.
FREELANCERS CAN CONTACT MULTIPLE PROJECTS AT ONCE
Freelancers are those who work with multiple companies/people simultaneously. A self-employed person might work for different companies. They will not be able to say that they work for other people. An individual who is self-employed will have a company that funnels contracts through.
SELF-EMPLOYED PEOPLE HAVE BUYERS, WHILE FREELANCERS HAVE CURRENTS
This is the simplest distinction between them. This is the easiest distinction between the two. Clients dictate the terms of the contract, while customers typically seek out particular products or services at a fixed pricing, usually based on the company’s reputation. This is not a legal definition and it is more of an attitude.
LEGAL ASPECT of FREELANCE VS.SELF EMPLOYED
It is not legal to define freelancers as self-employed. There are many differences in how you set up your business. You may need a license to freelance depending on where you live, how much you earn each month and what your income is. Sometimes, you only need the tools to do the actual work.
You can take your business to the next level by registering it without regard to legal requirements. It is up to you to choose the structure that suits your needs. Do you prefer a sole proprietorship, LLC or both?
Self-employed people usually start with a sole proprietorship and then expand. You don’t have to worry about legal issues if you are a freelancer making a few hundred dollars per month. If you become a boss or self-employed, you need to rethink your protection against clients, disasters and technical issues that could cause you to lose work. Even if you work remotely, your assets must be protected. You must keep your business property separate from your personal property.
Insurance is essential to help you win contracts. Sometimes, bigger companies will only contract with contractors who have liability coverage. It depends on your industry and the type of clients you are looking for. Do your research to ensure you get the right coverage.
TIPS TO SUCCESS AS A FREELANCER AND SELF-EMPLOYED INDIVIDUAL
These are the top tips for self-employed and freelancers:
Consistency is key to success. When you are the only one responsible, it can be difficult to stay motivated. Be consistent, however.
Set work hours and days. Many people make the error of working wherever and whenever they want. Although this may sound appealing at the time, it will only lead to frustration.
You should have a designated workspace and not work from your bed. You can now find many coworking spaces that will improve your productivity.
Be smart and hardworking. Success is not easy, but who said it was? Keep working hard and keep going. You will soon see the results.
We hope that you found this article useful.
This post was written by Tara Kintz. Tara is a director at Signature Workspace which is an office space in Clearwater FL. Signature Workspace, owned and operated by Cantor Fund Management, offers services and amenities such as private offices, flex space, co-working space, virtual offices, meeting/conference rooms, and more.