Does it matter whether you call yourself an independent contractor or freelancer?
If you’re self-employed, it may not seem important whether you consider yourself an independent contractor or freelancer. But it may matter to prospective clients.
The terms and type of work varies between contractors, freelancers, and consultants
For many tech solopreneurs or micro business owners, what you call yourself probably isn’t high on your priority list. Chances are you’re more worried about finding new clients and paying the bills than whether you’re considered a freelancer or independent contractor, or even a consultant.
But there are important distinctions between these roles. How you market yourself may affect the jobs you’re offered, the perks you can expect, and the challenges you’ll face.
While the terms “freelancer,” “contractor,” and “consultant” are often used interchangeably, you need to understand the differences between them so you can set appropriate client expectations and clearly define your responsibilities.
By learning more about each of these roles, you can decide which one is right for you.
What’s the difference between contractors, freelancers, and consultants?
There’s often confusion about who’s considered a freelancer versus an independent contractor. Both provide temporary services to clients, and they may even be one and the same.
Since they're not full-time employees, they don't receive employee benefits like health insurance. Medicare and Social Security are not withheld by the employer, and if they want workers' compensation insurance they have to buy it for themselves.
But there are differences that can have a big impact on whether a prospective client hires you – and their expectations once they do.
Here’s what sets each role apart.
Independent contractors typically provide specialized services to another company, often for an extended period of time. While the client will define the scope of the outsourced project, the independent contractor will control how the day-to-day work gets done.
For example, let’s say a florist needs a new website along with continuous updates for the site, and outsources the project to a web designer. As an independent contractor, the web designer must deliver a website that meets all of the client demands within the required timeframe. But it’s up to the web designer to determine how to build the site and deliver new content based on agreed upon deliverable dates.
A client contract with an independent contractor usually defines the basics of the business relationship, including the project description, responsibilities, timelines, and costs. It may also contain confidentiality, non-compete, or other contract terms.
Generally, as an independent contractor, you will:
- Provide a service to another company, often on a long-term or full-time basis
- Work in the client's office
- Control how and when services will be performed to meet project goals
- Pay self-employment taxes directly to the IRS and the state, if applicable
Freelancers generally work for businesses off-site and on their own schedule, and usually work for a number of clients at once. Their work is often task-oriented and short-term, such as developing an application or designing a pop-up or short-lived website.
A typical freelancer contract only covers project cost and scope, which can make you feel more like your own boss. You can often set your own rates.
Freelancing typically involves:
- Working for many clients simultaneously
- Performing work on call or on a one-time basis
- Working off-site
- Payment by the job or at an hourly rate
- Receiving a 1099-NEC from clients for income tax purposes
- Paying self-employment taxes directly to the IRS and the state, if applicable
Like freelance workers and contractors, consultants work for other businesses. However, they’re usually involved in setting strategy, evaluating performance, or assessing business needs.
Consultants may be hired to lend their expertise for a short time, but their contracts are often longer term.
- Provide clients with expert guidance
- Work on strategy-level projects
- Evaluate business needs, but don’t perform the recommended work
Why your business name matters
All of this may seem a little nitpicky. After all, does it really matter what you call yourself?
The truth is, it does with prospective clients. While the IRS doesn’t see a distinction between an independent contractor and a freelancer, clients do.
How you refer to yourself will shape client expectations such as:
- Where, when and how you work
- The nature of the services you provide (i.e., strategic versus tactical)
- The length of your contract
- Whether you have multiple clients at the same time
- Whether you work on a specific project or multiple projects
When you’re deciding how to position yourself, consider what’s most important to you. If you have specialized expertise and like the “big picture,” then consulting may be right for you. If you’re task-oriented and looking for quick one-and-done projects, then you may want to market yourself as a freelancer. And if you prefer larger, long-term projects and business relationships, then being an independent contractor could be your best bet.
Whichever title you choose for yourself, it’s your job to help your clients understand what you’ll do for them and what they can expect from you. By setting clear expectations from the start, you can set your small business up for success.