An independent contractor is hired to render goods or services to another entity. A self-employed person runs their own business and takes responsibility for its success or failure.
Key Differences
One difference is the degree of control and flexibility over the work. A self-employed person manages their own business, sets their own hours, and decides what services they offer independently. An independent contractor provides services to clients on a contractual basis.
Another difference relates to taxes and regulations. Independent contractors must pay self-employment taxes. Self-employed people need to register with the IRS as a sole proprietorship or other business structure.
Independence in Work
The distinction is that self-employment refers broadly to working for oneself. Independent contracting involves providing services to other entities on a contract basis rather than as a formal employment relationship. So independent contractors have less control than purely self-employed businesses, but have client relationships beyond selling directly to consumers.
Frequently Asked Questions
Is contracting the same as self-employed?
An independent contractor provides services on a contract basis, not as an employee. A self-employed person runs their own business.
Is it better to file as self-employed or independent contractor?
Both independent contractors and self-employed individuals must consider control, flexibility, and taxes when deciding on their business structure. Contractors work per contract, while the self-employed manage their businesses independently.