To be self employed or a freelancer – what’s the difference?

People talk a lot about being self-employed or a freelancer as if these words mean the same thing, but I think there is a world of difference between the two. Being self-employed or a freelancer is as different as apples and oranges.

I’ve been self-employed and giving business advice since 2000, but I’ve never called myself a freelancer.  Not that there’s anything wrong with being a freelancer, some of my best friends are freelancers.

That’s never been the way that I’ve thought about myself.  I’m more likely to talk about running my own consultancy company, even though my company is just me in my little office. I do worry that there’s something self-limiting about the term freelancer.

Why choose between being self-employed or a freelancer?

To me, a freelancer means someone who does pieces of work for other people.  I think of myself as someone who employs freelancers, as I’ve got a lovely army of people who help me with all the bits and pieces involved in running the Joy of Business.

Freelancing seems to imply a single person who works on their own, doing different projects for a variety of companies.

It’s not about the money

There are lots of freelancers out there who earn more money than me.  Freelance IT contractors or software developers get a higher day rate and can get a few months of working every day, whereas I don’t bill every day of the week.

And there are lots of people running their own companies. Often quite big companies, who don’t make any profit at all, and might even be making a loss. Some of the freelancers are probably more financially secure than these folk. If they lose a gig, they can just pick up another one.

It’s about what you’re building

The problem with calling yourself a freelancer, for me, is that it will always be just you.  The freelancers I use to help with my marketing and admin, for example, are people who are selling me a chunk of their own time.

And although some freelancers will make the transition to running bigger companies, perhaps through a network of other freelancers, or by the more traditional route of taking on staff. This will be the point at which they’ll probably stop calling themselves freelancers because they’ve got out of that mindset. They’re running a business now.

People who call themselves self-employed, or talking about running a business from the start, tend to make that transition to a bigger business sooner.  They’re open to the idea of building something.  And even if, like me, they choose to stay as one person (albeit with an army of freelancers to help) they’ve got a mindset of growth right from the beginning.

I think that path to a more grown-up business is the real difference between whether you see yourself as self-employed or a freelancer.

Let yourself be open to that possibility

If you’re quite early on with your business journey, then I’d encourage you to think about the opportunities for growth right now.

Even if your business is tiny, think of it as a business.

Because it will save us a lot of time and soul searching later on when you come to me for help in expanding because you’ll have already got past that freelancer mindset.

Isn’t there a legal or tax difference between being self-employed or a freelancer?

People often think that there’s a legal difference between being self-employed or a freelancer, but there isn’t, it’s just what you call yourself, and, I’m arguing, your mindset for being able to grow your business.

The legal and tax differences (in the UK) are whether you’re a sole trader or a limited company.  This difference only determines how you’re treated in law, and for tax purposes.

You can be a sole trader or a limited company, whether you see yourself as self-employed or a freelancer, and your choice will be based on how much profit you make, and which one will let you pay less tax. There’s a handy calculator here to work out which one you should be.

Once you’ve got that pesky tax issue out of the way, you can think properly about whether you want to think of yourself as a freelancer or that you are running a business.

If you’re already there

If you’ve been freelancing (or been self-employed and running a business, whatever you’ve been calling it) for a while and you’re thinking about getting to the next level. You might want some help to get there faster.

This is where my Remarkable Business Programme can help you transform your business. 

Make your business Remarkable:

• Get the right strategy for your business and an action plan to work on from the very start.
• Have the support and accountability from other business owners
• Workshops, resources and activities that you apply to your business
• Understand how your pricing, positioning, and negotiations can change your cash flow in a positive way.
• Support and feedback directly from me. 

Find out more

Other blogs about freelancing vs running a business

The transition from a freelancer to a grown-up business

My business models series – choose the right business model and move away from the freelancer/contractor/prostitute/billable hours model

The Tesco Test – does your business pass the Tesco Test, or do you need to make some changes?

How to feel good about charging more 

Photo credit – Jonatas Cunha from Flickr on a creative commons license,  grains, man and time on Pxhere and Jeremy Bishop on Unsplash