The terms “self-employed” and “freelancer” are often used interchangeably, but there are some practical distinctions between the two. In this article, we explore what it means to be self-employed versus being a freelancer, highlighting key advantages and considerations for each.
What Does It Mean to Be Self-Employed?
Being self-employed means that an individual runs their own business and is responsible for its operations. Self-employment can take many forms, including sole traders, limited company directors, and independent contractors.
Key Characteristics of Self-Employment:
- Full control over business decisions, branding, and strategy.
- Often operates under a business name rather than personal identity.
- Can employ staff or subcontract work.
- Responsible for managing all aspects of taxation, insurance, and compliance.
- May have multiple income streams from various clients or business activities.
Examples: Consultancies, small business owners, tradespeople, personal trainers, and shop owners.
What is a Freelancer?
A freelancer is often considered to be a specific type of self-employed individual who typically works on a project-by-project basis for multiple clients. Freelancers often operate in creative, digital, and professional service industries.
Key Characteristics of Freelancing:
- Works independently and offers specific skills or services.
- Usually hired for short-term contracts.
- Often works remotely or on a flexible schedule.
- Clients often dictate project scope, but freelancers have control over how they complete the work.
- May operate under their personal name or a registered business entity.
Examples: Writers, graphic designers, web developers, photographers, and marketing consultants.
Key Differences Between Self-Employment and Freelancing
| Aspect | Self-Employed | Freelancer |
|---|---|---|
| Business Structure | Some flexibility but depends on the business model | Typically a sole trader, but may register a business |
| Work Commitment | Can involve long-term business operations | Generally short-term, project-based work |
| Client Relationships | May have long-term contracts with clients or customers | Works with multiple clients on individual projects |
| Flexibility | Some flexibility but depends on business model | Highly flexible, with control over workload and schedule |
| Income Stability | May have consistent revenue from a broad range of customers | Income can be variable and project-dependent |
Which One is Right for You?
Deciding between self-employment and freelancing depends on your goals, industry, and preferred work style. Strictly speaking you have the choice of business structure for either and there is no real difference when it comes to that. However, how you position yourself will likely depend on whether you want to be the business (as the freelancer), or whether you want to create a brand with a view to scaling and bringing additional team members on board.
- Consider Self-Employment If:
- You want to build a standalone business with growth potential.
- You plan to hire employees or subcontractors.
- You prefer having a consistent customer base.
- Consider Freelancing If:
- You value flexibility and the ability to choose projects.
- You prefer working independently without business overheads.
- You want to test different industries or clients before committing to a business model.
Final Thoughts
Both self-employment and freelancing offer freedom and autonomy and are effectively the same thing, the principle difference being whether you are working alone, or looking to create a broader business – in fact, many small business owners start as freelancers before expanding. Whether you choose to establish a business or work as a freelancer, it’s essential to manage your finances, understand tax obligations, and create a sustainable plan.
For expert guidance on structuring your business, managing contracts, and maximising financial efficiency our small business consultants can help.
