Sole Proprietor vs. Independent Contractor: What’s the Difference?

TL;DR

‍• Independent contractors and sole-proprietors are both self-employed.

• The main difference between a sole proprietor and an independent contractor is that a sole proprietor is a type of legal business entity, while an independent contractor is a type of work arrangement, meaning many Independent Contractors generally work for fewer clients and on long-term projects. They sign contracts that lay out exact job requirements, so they have less flexibility over their schedule.

•  Many self-employed people consider themselves both.

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A sole proprietor is a business owner who is the sole owner of the business and is personally responsible for all aspects of the business, including its profits and losses, liabilities, and debts. This means that the business and the owner are one and the same for legal and tax purposes.

On the other hand, an independent contractor is a self-employed individual who provides services to a client or business. Independent contractors are not employees, so they do not receive benefits or have taxes withheld from their paychecks. They are responsible for paying their own taxes and providing their own equipment and supplies.

The main difference between a sole proprietor and an independent contractor is that a sole proprietor is a type of business entity, while an independent contractor is a type of work arrangement. A sole proprietor can hire employees and have a separate legal entity, while an independent contractor is typically an individual working for themselves.

In summary, the key differences between a sole proprietor and an independent contractor are the nature of their business structure and work arrangement.

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‍Independent Contractor

‍An independent contractor is a self-employed person who does work for a client or company. They typically get hired for a long period of time (i.e., several months to a year) to work on a specific project or task, and it’s common that they work for one client at a time. Independent contractors always work under a contract that clearly outlines the project scope, job requirements, and pay. As a result, independent contractors have less flexibility over their working schedule; however, they aren’t considered full-time employees and aren’t entitled to company benefits.

‍Freelancer

‍A freelancer is also a self-employed individual who provides services to clients on a project-by-project basis. However, freelancers tend to have more flexibility in terms of the projects they take on and the clients they work with. They may specialize in a particular area, such as graphic design or writing. Freelancers tend to work on multiple, short-term client projects, whereas independent contractors will typically work with one client on a long-term basis. Freelancers are also responsible for their own taxes and benefits.

‍Key Differences

‍The main difference between independent contractors and freelancers is the degree of control and autonomy they have over their work. Independent contractors are typically contracted for a set period of time and have less flexibility in terms of the work they do and the clients they work with. Freelancers, on the other hand, have more flexibility and may work with a wider range of clients on a project-by-project basis.

Key Similarities

‍Both freelancers and contractors are independent. Meaning they are responsible for managing their own income, benefits, expenses and taxes. Both get the advantages of flexibility and personal freedom, as well as the responsibilities.

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