Freelancer vs. Self-Employed: Understand Now the Main Differences

Freelance vs. self-employed, that is the question. Right? If you have decided to venture out on your own, you will want to define your employment status. Learn more about freelancing and self-employment within this blog.

Freelancer vs. Self-employed: understand now the main differences

Freelance and self-employed are two very popular terms that are often used interchangeably. However, is being a freelancer the same thing as being a self-employed person? Keep reading to learn more about freelance vs. self-employed.

While there are indeed similarities between the two, they are different, especially in a legal sense.

Regardless of whether you are looking to be a freelance digital marketer or start your own social media marketing business, you will want to ensure you understand the difference between freelance vs. self-employed, so you can decide how you and others should view yourself and your business.

This information can help you set reachable goals, plan for the future, and create your own identity.

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    Freelance vs. Self-Employed: What Are the Main Differences?

    Some of these aren’t hard and fast rules for differentiating between a freelancer and a self-employed individual, but they do help you better understand freelance vs. self-employed.

    #1: Freelancers Perform Work for Someone

    Freelancers can set their hours and rates, but they still accept work from other people. Contracts are signed, terms are accepted, and work is performed.

    Self-employed individuals, on the other hand, own their businesses, but they don’t necessarily have individual client contracts. Instead, customers are sold to more consistently.

    #2: Freelancers Generally Work Alone

    As a general rule, a freelancer is a person who works alone. They don’t typically have any help to perform the work they do.

    Someone self-employed tends to have a team under their belt, helping them to keep their business going. This helps to lead to a larger-sized business than one that a freelancer operates.

    #3: Freelancers May Still Have a 9-to-5

    Freelance work can be done anytime and even if you still have a regular day job that you go to. This is often the way most freelancers do it.

    It helps to supplement your regular income, work on a passionate hobby, or see the potential of freelancing as a long-term gig.

    Individuals who consider themselves self-employed will work for themselves and no one else. Therefore, they will generally not have a day job on top of their own business.

    #4: Freelancers Tend to Tackle Multiple Jobs Simultaneously

    Freelancers accept work from others, and more often than not, they are working on more than one job or project at any given time.

    Now, self-employed individuals may also work with several companies, but the difference is that self-employed people don’t exactly share this information nor do they describe their work in this way.

    Instead, self-employed individuals may have a company, or two, or three that they funnel their contracts through.

    All in all, self-employed individuals are extremely loyal to their business as well as their current and prospective customers.

    They are dedicated to keeping customers happy and growing their business. Freelancers tend to have multiple commitments with different clients.

    #5: Freelancers Have Clients Instead of Customers

    Clients and customers are terms that are often used interchangeably even though they have different meanings.

    Clients tend to influence the terms of a contract and have work performed for them, whereas customers look for a service or product to purchase based on any number of factors.

    Therefore, if you have clients, you are a freelancer. If you have customers, you are self-employed.

    Why Is Proper Classification Important?

    You may wonder why it really matters to define yourself as a freelancer vs. a self-employed individual. As long as you are getting paid and paying taxes, what does it matter?

    There are several reasons why proper classification of your employment status matters. Let’s look at a few of them.

    Management of Taxes

    Suppose you are identified as an independent contractor or freelancer with a client. In that case, they will not be required to withhold income, Medicaid, or Social Security taxes on the income you earn.

    Instead, you are 100 percent responsible for the reporting of your income and the payment of your self-employment taxes.

    Benefits

    If you are improperly classified, you may lose out on good benefits. For instance, if you are an employee and are classified as an independent contractor, you will lose out on employee perks like vacation days, sick time, worker’s compensation, and health care insurance.

    Set Expectations

    Knowing whether you are a freelancer or a self-employed individual can go a long way in setting your business expectations as well as client/customer expectations. You know what to expect, and so do they.

    Proper classification is not only important for yourself, but it is also important if you are self-employed and decide to hire employees or freelance contractors. You want to classify them properly so that nothing is amiss.

    What Is the Best Option for the Professionals?

    When it comes to determining whether you are or want to be a freelancer or self-employed individual, it comes down to personal preferences and what your goals are.

    Let’s look at the pros and cons of being a freelancer vs. self-employed.

    Pros of Freelancing

    Freelancers can choose who they decide to work with. If they don’t want to work with a particular client, possibly because of their brand values, then they don’t have to.

    They can make that decision. Further, freelancers can choose the number of clients that they take on at any given time.

    As you can see, freelancers have significant control over what they do and don’t do. This is also true with their schedule. If a freelancer only wants to work 2 hours on Monday and Wednesday and then 6 hours the rest of the week, they can do that.

    They don’t have to work the typical 9-to-5 hours like a standard employee. There is an abundant amount of flexibility in the freelance industry.

    Because freelancers can choose which clients they work with, what projects they take on, and how many hours they work, the job is often more rewarding.

    Cons of Freelancing

    One of the most significant disadvantages to freelancing is the fact that you aren’t guaranteed work or a certain number of projects each week. With irregular work, it can be difficult to properly gauge your monthly finances.

    Once a job with one client is finished, it can be difficult to find a new gig. Even when you have contracts with clients, they can still terminate the contract early or push the deadline out, preventing you from getting the payment you had anticipated on.

    Speaking of getting payments, it can often be challenging to collect payments from clients. Freelancers sometimes run into situations where the work has been completed but the client refuses to pay.

    Pros of Self-Employment

    As a self-employed individual, you have the opportunity to do what you love for a living. You can take your passion and turn it into a solid source of income for you and your family by starting your very own business.

    Since you are the owner of the business, you are your boss. This means you don’t have to worry about anyone else telling you what you should do, how you should it, and when you should do it.

    As your own boss and owner of your own business, you have the capability of taking your business as high as you want. This means you can make as much money as you want.

    Of course, the amount of money you make will heavily depend on how much time and effort you put into building your brand. All in all, though, the growth of your business is in your hands and not someone else’s.

    Cons of Self-Employment

    One of the biggest drawbacks to being self-employed is the taxes you have to pay at the end of the year or throughout the year.

    Generally, self-employment taxes are higher than the taxes that employees pay. And, instead of paying taxes once a year, you may be required to pay them quarterly.

    As a self-employed individual, you won’t have benefits. This includes paid time off for vacations, holidays, sick leave, etc. If you need to take off work for whatever reason, you won’t be paid for that time.

    Health insurance can also prove to be difficult to obtain — and expensive. Further, there will be no 401(k) contribution, which means you are responsible for saving for your retirement.

    Wrap Up

    So, what is the best option for you? Freelancer vs. self-employed has their pros and cons to each, with each bringing a certain level of flexibility and autonomy to the table that working as an employee simply does not have.

    The best option for you will depend on your situation and goals. Hopefully, the aforementioned information can help point you in the right direction.

    Whether as a Freelancer vs. a self-employed individual, an online business will require some work on your part. Where should you start?

    Learning about Google Analytics and how it can help you as a marketing professional is a good place to start.

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