Freelance vs. Self-Employed Professionals: Similarities and Differences

Being your own boss is a rewarding experience — in spite of, and sometimes because of, its challenges. When you work for yourself, you need to have a handle on your work style, schedule, finances, business structure, and more. This is true whether you decide to work as a freelancer or take another self-employment route.

Because while freelancing and self-employment are intrinsically linked, there are different ways of being your own boss. The following guide will take a closer look at what self-employment is like for a freelancer vs. other self-employed people.

What is a freelancer?

A freelancer is an independent contractor who creates work and does tasks for clients. Freelancers can hold many different roles, including but not limited to:

• Writer
• Graphic designer
• Assistant
• Business consultant
• Software developer
• Artist
• Tutor
• News reporter

Regardless of their title or industry, one thing is consistent about freelancers: they don’t work for a single employer. Instead, freelancers have various clients who pay them to do jobs on a short-term or ongoing basis.

What is a self-employed person?

A self-employed person is a professional who runs their own business. All freelancers are self-employed, but not all self-employed individuals are freelancers! Self-employment can entail any of the following:

• Running a freelance business
• Providing home services to customers in a local area (think cleaning, plumbing, and electrical work)
• Owning a mechanic’s garage
• Cooking, baking, and catering
• Selling goods at farmers markets
• Owning a store that sells goods to customers online or in person
• Cutting hair and doing nails
• Providing spa services

Freelance vs. self-employed: Notable similarities

No matter how you choose to work for yourself, several things (including your control over work-life balance) are true.

Autonomy

The biggest similarity between all self-employed people, whether they identify as freelancers or not, is autonomy. Being self-employed gives you a great deal of control over:

• Where you work
• When you work
• How you work
• The tools you use to do your work

A freelancer’s client, or the customer of a self-employed business owner, may request a specific project or due date. Scheduling and conducting the work, though, is entirely at the self-employed person’s discretion.

For example, I’m a self-employed freelancer. My clients ask me to take on various projects and suggest a due date. Once I agree, I have autonomy over things like:

• My working hours every day
• My work schedule for the week or month
• The software and systems I use to do my work

With careful planning, self-employed workers can obtain a good work-life balance.

Responsibility

Because I have so much autonomy as a self-employed freelancer, I also have a lot of responsibility. If I make a mistake, there’s no employer or company policy for me to point to — other than the policies I’ve created for my own operations. I have to take full responsibility for any issues that arise and make sure they are corrected in a timely and comprehensive fashion.

Self-employed people who aren’t freelancers have a lot of responsibility, too. For example, they are more likely to have a storefront or office — which makes building maintenance critical. They are also more likely to have employees of their own, which means they need to handle HR functions and have more tax and licensing obligations.

Legal business structure

Self-employed business owners and freelancers can choose from a variety of similar legal structures. For example, in the U.S., a self-employed person could choose to be:

• A sole proprietor. This is the easiest form of business to set up, and allows you to start working immediately using your legal name and social security number. You can also opt to get an employer identification number (EIN) from the IRS and create a fictitious name (also called a “doing business as” name, or DBA) for your paperwork and taxes. A sole proprietor may be called a “sole trader” in other regions.
• A limited liability corporation (LLC). LLCs can give freelancers and entrepreneurs some additional legal protections and may be required in some situations, such as if you want to obtain certain kinds of funding for your business venture.
• An S-corporation (S-corp). S-Corp is actually a tax designation for LLCs and can offer some professionals savings at tax time.

Many people select their business structure based on legal complexity, financial factors, tax purposes, and business risk. There’s no single defining factor that says a freelancer has to be a sole proprietor while a small business owner is an LLC. For example, some sole proprietors who run landscaping businesses have employees, and some freelancers who work under an LLC are taxed as an S-corp.

Lawyers and accountants can help you decide which type of structure is best for your work and life.

Finding work

Freelancers and self-employed business owners can find work in similar ways, including:

• Responding to client and customer requests (freelancers can use a marketplace like Upwork; self-employed service pros can use platforms like Angi or Thumbtack)
• Advertising online or through traditional media
• Maintaining a website
• Creating marketing materials for social media
• Attending local networking events
• Joining professional organizations
• Working with a referral service
• Promoting products or services on an online directory

Rates and pricing

Self-employed professionals set their own rates and prices, whether they’re working as a web designer or operating a computer repair shop. Of course, clients and customers are free not to pay those prices — so you’ll want to pick rates that are in line with both your experience and expertise as well as industry and location.

A business consultant can help you figure out the right rates to charge whenever you launch a new product line or service offering.

Income and tax obligations

Self-employment allows you to set your own income — assuming you make enough money from your clients and customers to reach your goal!

But self-employed workers are also responsible for calculating, withholding, and paying their own taxes throughout the year. You can’t count every payment from a client as pure income — you have to account for business expenses, self-employment taxes, loan payments, and more. Whatever is left over can be saved or paid to yourself.

Calculating your own income taxes and salary can be tricky, so many self-employed workers consult with an accountant or work with a bookkeeper on a regular basis. These pros can also help you make sure that you file the correct tax forms and tax returns every year.

Benefits

All self-employed professionals are responsible for their own benefits. In the U.S., benefits include healthcare and a retirement plan — both of which people usually obtain through their employer. Someone who is self employed will need to gain health insurance through a parent, spouse, state marketplace, or private insurance broker.

And as a self-employed person, you can decide to either save for retirement on your own in a traditional savings account or open up certain types of investment accounts (SEP-IRAs are one example that’s available to many self-employed people).

Freelance vs. self-employed: Key differences

There are a few differences between freelancing and other forms of self-employed work, though, most notably the way you form client relationships and build a team.

Type of work

While all self-employed people have autonomy over their schedule and projects, a freelancer often responds to client requests. A home services provider or small business owner might take requests, too — or they might offer a defined list of products and services to sell customers.

Team size

Technically speaking, any self-employed person can have employees, but many freelancers work on their own. Some freelancers might subcontract work or collaborate with another independent pro, but those people aren’t true employees — they maintain their own autonomy.

Self-employed business owners who run marketing agencies, plumbing companies, boutiques, hair salons, and the like may be more likely to hire employees who work exclusively for their business.

Self-employment doesn’t need to be a completely solo venture

Working for yourself, especially if you go the route of a solo freelancer, can feel isolating. It’s important to both find community (either online or in your local area) and leverage other people’s expertise in your business.

Whether you want to hire a graphic designer to create your logo or an accountant to make sure your taxes are in order, Upwork makes creating these connections easy. Upwork Business Plus is the best fit for many self-employed business owners. The Business Plus plan gives you access to Uma, Upwork’s Mindful AI™ for drafting job posts, evaluating candidates, and even conducting interviews — and it’s free to create an account. Sign up today to begin exploring Upwork, working with Uma, and getting targeted help for your biggest business needs.

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This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.

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