Are You Self-Employed or Do You Have a Company?

While the terms self-employed and company owner seem interchangeable, there are contrasts and you can determine which one you are by learning the unique features and limits of each.

“Self-employed” and “business owner” are terms often used interchangeably. But are they the same things? 

The answer is no.

When you’re self-employed, you’re not always a business owner. You may simply have formed your job. While it sounds rambling, each becomes clear when you understand what the terms mean.

Open a Company in Russia
Open a Company in Russia
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What Constitutes Being Self-Employed?

“The distinction between being self-employed and being a business owner boils down to whether you are performing for someone else or someone else is working for yourself. If you are strictly working for yourself, delivering services to another person or company, you are self-employed.”

Related: How to Pay Yourself in an LLC

Kathleen Overfield-Zook, assistant manager of the Gilliam Center for Entrepreneurship at James Madison University, worked as a freelance musician and instructor for 25 years. “During this time, I considered myself self-employed,” she says. “I worked on my terms. If I wanted to expand my teaching schedule, I announced I was taking on more students and adding them to my workload. If I desired to play a certain concert—or more specifically, didn’t want to play a concert—I’d say yes or no.”

Overfield-Zook didn’t have a company name. She was paid directly, and her income went directly into her bank account. “This combination of freelance work, where I was not paid full time by any one company or business, was how I made my living,” she says.

Being self-employed compromises having complete control. 

However, you are limited in how many different approaches the company may take by how much time you have.

What Is Business Ownership?

If you have others that are operating on your behalf, you have started a company. 

A business can be scaled by adding new employees, new products, and new services.

Overfield-Zook shifted from self-employed to a business owner when she founded The Bloom Trio and Event Musicians LLC. “We formed in 2012 and quickly evolved one of the most in-demand row ensembles in the Shenandoah and central areas of Virginia for weddings and other memorable events,” she says. “With little to no background in enterprise development, we learned as we went. I finally formed an LLC with a separate bank account. I also started sending 1099s to the other musicians I hired to perform with us.”

Being a company owner means managing others. 

For many, this is the hardest leap to take because you give up some control and move from creator to manager.

Self-Employed vs. Business Owner

The difference is how you earn.

Self-employed people earn from their work, but business owners earn from a system they created. 

For example, if you are a graphic designer, you get paid for the designs you create. This makes you self-employed. 

However, if you run a graphic design agency, you have a system that generates income from graphic design work. You are not privately creating every piece of design that your agency produces, and you will typically have workers who will be doing the actual design work.

Another way to understand the difference is to ask yourself what would occur if you took a vacation. 

If you’re self-employed, you will no longer be working and your income will dry up.

If you’re a business owner, the system you created will continue generating income without you.

You can also look at how you file your taxes, 

As a self-employed person, finances are like.

With your own business, you pay yourself and others from a distinct account. 

Whether you’re self-employed or a business owner, you’re a risk-taker.

Both the self-employed and the business owner must figure out 

Either way, you’ve found the courage to strike your path.

Open a Company in Russia
Open a Company in Russia