Freelance vs. Self-Employed: Is There a Difference?

Some people may not realize that there is a difference between being freelance vs being self employed. While there is some overlap, these two terms carry distinct meanings and implications.

In today’s blog post, you’ll learn:

• The definitions of self-employment and freelancing
• The differences between being self-employed and working as a freelancer
• Which path may be right for you, based on their similarities and differences

What Does Self-Employed Mean?

Being self-employed means that an individual runs their own business. They could be a sole proprietor (a one-person business), or work in partnership with other owners. A self-employed person might handle all aspects of their business – including finances, operations, and marketing – themselves. Or, they might enlist the help of employees to assist them in running their business.

They have complete control over the work they take on, and bear full responsibility for its success or failure. Running your own business as a self-employed professional requires a ton of commitment, so you can expect to spend a great deal of time launching and running it.

People often confuse self-employed professionals with small business owners, but there is a difference between them.

What Does Freelance Mean?

On the other hand, freelancing refers to a specific type of self-employment. Freelancers are self-employed professionals who offer their skills and services on a project-by-project basis. They can accept multiple jobs and work for various clients or employers simultaneously. They aren’t bound to a single, long-term contract.

Freelancing has many benefits; freelance can choose which projects to accept, negotiate their rates, and often work remotely or from different locations.

What’s the Difference between Freelance and Self-Employed?

While freelancing and self-employment are similar in some ways, they differ in work structure, flexibility, client relationships, and income.

1. Type of Work

• Self-employed people typically focus on running their own business, which may involve manufacturing products, selling goods directly to customers, or offering a particular service. They must source their own customers and clients. They choose what they work on, and dictate their own work style.
• Freelancers work on specific projects or assignments for clients or companies. They are hired for their skills or expertise in a particular area. They usually work under the direction of the client, within a defined scope. Like the self-employed, freelancers face the challenges of finding clients.

2. Business Structure

• Self-employed people usually manage all aspects of their business, including marketing, administration, and finances. They often have employees to help them, although some work alone. If they have employees, they have the same responsibilities as any employer would (for example ensuring they are paid fairly and on time).
• Freelancers, like self-employed people, are responsible for all aspects of their business. However, they don’t have employees, and mostly work alone.

3. Client Relationships

• Self-employed people often build long-term relationships with customers or clients who use their products or services. Self-employed individuals often rely on a few key clients for the majority of their income, so their aim is to build trust, and attract repeat business.
• Freelancers often have short-term relationships with clients, completing individual projects, and moving on to the next. Each project has a defined scope and timeline for completion. However, freelancers don’t burn bridges with clients; they may stay in touch for future projects, and clients will often provide testimonials and referrals. For freelancers, this is an important way to find new clients and boost their income.

4. Income and Payment Structure

• Self-employed people generate income from their business operations and sales. If they have long-term clients that provide repeat business, they will have a steady income. However, they also have to consider business overheads (for example employee salaries), which can reduce their net income.
• Freelancers receive payment for specific projects or services, often negotiated on a per-project basis. Because freelancers set their own rates, they can predict their monthly income – but their income is likely to fluctuate month to month depending on the projects they secure. A freelancer’s overheads tend to be less than that of the self-employed, but they do have costs associated with their work. For example, they may need to pay for a website, or other tools related to their work. They also have to manage their own budget and savings, such as ensuring that they can pay their yearly taxes.

Both freelancers and self-employed professionals are subject to taxation just like regular workers. Both pay a special self-employment tax.

5. Flexibility and Variety

• Self-employed people enjoy more flexibility and independence than traditional employees. They can make decisions on how they run their business, choose their business hours, and set their own rates – although there may be some limitations depending on the industry. For example, a retailer will typically need to be open within standard operating hours. The scope and variety of their work can also vary significantly depending on the industry they work in.
• Freelancers can work with multiple clients simultaneously, and aren’t necessarily limited to one industry (although many freelancers do choose a niche in order to specialize and increase their earnings). Like the self-employed, freelancers can set their own rates, and choose which clients they want to work with. They can also choose when and where they work, as long as they are able to meet client deadlines.

Summary: Freelance vs Self-Employed

To help you decide which path is right for you, here is a table outlining the similarities and differences between freelancers and self-employed professionals based on work and income structure, flexibility, and client relationships.

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