A helpful guide to freelance vs. self-employed — Is there a difference?

A helpful guide to freelance vs. self-employed — Is there a difference?

Next Insurance Staff
By Next Insurance Staff
Jun 29, 2021
8 min read

Freelance vs. self-employed, that is the question. Or is it? 

While you know that you’re not an employee because you don't work for a company, you may be wondering what your employment status should actually be called. 

For starters, let's define some terms. Is freelance employment the same thing as being self-employed? 

For the most part, yes. By legal standards, freelance or self-employed are also about the same thing, so why are there two terms out there?

Defining freelance vs. self-employed

There’s a subtle difference between being a freelance worker and being self-employed. Both roles give you autonomy in how you work and what you work on. 

One of the main differences between being freelance or self-employed is how you want to see yourself, and your business. Here are some general definitions.

Are you a freelancer?

Some people don’t like the term freelancer. They think it sounds less serious than being self-employed.

In many people’s minds freelancing is gig-oriented. Freelancers, also known as contractors, are seen as hired hands to get a project done. 

There’s also the idea of selling services rather than ideas. Many people see freelancers as professionals who sell services (like freelance writers or graphic designers) instead of products. 

People who define themselves as freelancers tend to work alone. They can sometimes work the hours they wish and take on multiple jobs with different clients. However, they typically must follow the requests of clients, as opposed to self-employed people who have more control over their output.

That means that in spite of being self-employed, freelance work can often feel like still working for someone, especially if they’re working a lot of hours consistently on a project. 

Or are you self-employed?

While freelancers are always self-employed, self-employed people aren’t necessarily freelancers.

The term self-employed is often associated with business owners. Many startup founders and business owners fall into this category and identify themselves this way.

Self-employed individuals are the people you think of as someone “being their own boss.” They get to decide what they work on, which hours they work, and how they work. Typically, they don’t take instruction from clients.

Self-employed individuals get to decide what they work on, which hours they work and how they work. Typically, they don’t take instruction from clients.

A self-employed person is more likely to have (or want) employees and they sometimes hire freelancers for help.

Tax considerations: freelancers vs. self-employed

Regardless if you see yourself as freelance vs. self-employed, the government doesn’t make a distinction between the two when it comes to taxes. 

Generally, the Internal Revenue Service (IRS) considers you self-employed if any of the following apply:

  • You carry on a trade or business as a sole proprietor or an independent contractor. (Here’s the difference between the two.)
  • You are a member of a partnership that carries on a trade or business.
  • You are otherwise in business for yourself (including a part-time business)

It’s not very precise, but you can see that it buckets together self-employed, freelancers, and independent contractors. 

Depending on the nature of your business and your goals for it (i.e., hiring staff or getting business loans), you may want to register your business with the IRS for tax purposes. This is not always necessary for freelance workers but can be helpful for separating your business from your personal life.

Contact a lawyer, accountant, or the local office of the Small Business Administration (SBA) to help you figure out what’s best for your business needs.

How do freelancers and self-employed workers pay taxes?

Paying taxes as a freelancer or self-employed worker is your responsibility. The IRS checklist is a good place to start, but you’ll also need to research for your local and state requirements.

Most business owners pay taxes on a quarterly basis, estimating the amount they will owe throughout the year. You can use the IRS form 1040-ES to figure out your estimated tax payments. 

If you’ve registered your business with the proper authorities, there are a number of business taxes you’ll need to address on the federal, state and local levels. They include income tax, self-employment tax (a social security and Medicare tax), and employment taxes if you have employees.

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If you’re already wondering how much you’ll pay at the end of the year, there are plenty of freelance income tax calculator tools available online to help you out. The amount you pay will of course depend on things like your age, gender, and marital status – all things you’ll need to check off on your freelance income tax form when you file.

As for freelance tax deductions, there are plenty of those available. These can include obvious things like your office space, office supplies, and travel expenses. However, don’t forget to include things like any advertising and marketing services you use, premiums paid for health insurance, and even professional development courses.

While doing taxes as a freelancer isn't all that fun, it should get easier over time. Plus, if you have the budget, you can always hire a consultant of your own — an accountant or tax advisor — to help you with tax returns and tell you which tax forms to fill out.

Do freelancers and self-employed workers need insurance?

Whether you’re calling yourself freelance vs. self-employed, business insurance is an important consideration for the work that you do. Your insurance needs remain the same for both. 

Some self-employed professions like therapists, childcare services and construction workers are required to have business insurance to operate due to risks involved with their jobs. A lot of freelance and self-employed jobs don't require it, but it’s still a good idea to have.

Both freelancers and self-employed professionals need business insurance to protect their personal finances. Basically, insurance policies transfer risks associated with your business from your bank account to the insurance company. Having good coverage means that you can focus on your business instead of worrying about potential incidents.

Another reason self-employed business owners and freelancers get business insurance is that it helps them gain an edge and win more clients. Landing jobs and contracts are competitive. Having a Certificate of Insurance (COI) available show

Many freelancers begin with general liability coverage for their business. It’s one of the most flexible kinds of coverage.

For example, if you’re a carpenter and your client trips on a toolbox and gets injured, your liability insurance will cover any resulting lawsuits and in some cases, even medical expenses. Or if you’re visiting a client in their home or office and you knock over and smash an expensive vase or spill water over a computer, your liability insurance will cover it. 

Professional liability insurance is also good to have as a freelancer or self-employed individual. It can protect you if a client accuses you of making a professional mistake or missing a deadline that costs them money — whether the claim is warranted or not.

Other useful forms of coverage include commercial auto insurance (if you have a vehicle used for something like a moving business), and workers’ compensation if you have employees.

How NEXT Insurance helps freelance and self-employed individuals

Freelance vs. self-employed. Either way, you’re busy juggling things every day to keep your business going. 

NEXT Insurance makes small business insurance simple, affordable, and easy so you can understand your options and get the coverage you need online in less than 10 minutes.

Simply answer a few questions with our online instant quote, and we’ll create a customized insurance package for your business. 

If you have any questions, you can hop on an online chat or phone call with one of our licensed insurance advisors.

Start a free instant quote today.

A helpful guide to freelance vs. self-employed — Is there a difference?


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NEXT’s mission is to help entrepreneurs thrive.

We’re doing that by building the only technology-led, full-stack provider of small business insurance in the industry, taking on the entire value chain and transforming the customer experience.

We want to make sure you have all of the information you need to make an informed decisions about purchasing business insurance. We hope you’ll find this information helpful.

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