What It Means To Be Self-Employed

By Chris Lewis

Being self-employed can be very rewarding, but it is also very demanding. While many people are familiar with the term “self-employed,” they do not understand its true meaning. The self-employed status just basically means that you are an owner of a small business. There are several different types of businesses listed under the self-employment category including a sole proprietorship, Partnership and Limited Liability Company or LLC. However, a LLC or partnership that is taxed as a corporation is not classified as self-employed.

Not An Employee

While most self-employed people work in their business, they are not considered an employee. The main reason for this is because a company does not employ the, nor do they earn a salary or wage. They are basically operating their business on a day-to-day basis.

Not A Shareholder

A shareholder is also not classified as self-employed, even though they own stock in a specific company and one of the owners of a small or large corporation. A shareholder does receive dividends, which are based on their shares of ownership. Many people make the mistake of defining a corporate shareholder as a self-employed person.

Be Responsible For Everything

Self-employed people are responsible for every aspect of their business. In fact, they are responsible for the physical work, as well as the financial part of the business. If a self-employed person is injured on the job, they will be forced to pay out-of-pocket for their health care costs. The main reason for this is because they are not covered under a worker’s compensation policy.

Since self-employed individuals most often do not carry health care, disability or other types of insurances, they will be forced to work injured. They typically do not have someone else to back him or her up and they cannot afford to allow their business to go non-operational for any period of time. If money is not coming in, the person will be at a risk of losing everything they invested into their business. However, in some cases self-employed businesses will hire several workers, such as a small retail business or restaurant.

Must Pay Taxes

Just like any other type of business owner, self-employed businesses are required by law to pay taxes. The amount of self-employment taxes paid will depend on how much profit the business earns each year. They also have to pay social security and Medicaid rates each year. Of course, they can write-off some of their expenses. As a self-employed person, you can write-off for a retirement plan, such as a 401(k), business operation costs, automobile expenses, educational expenses, airline fees, restaurant meals and banking feels. While these may not seem like a big deal, when you are self-employed every small saving will be of major importance.


As mentioned above, being a self-employed business owner can be very rewarding. However, it will depend on the type of business you go into. Most self-employed people choose to not work a grinding 9 to 5 job, because they probably did it for at least half of their life. Some examples include a social media consultant, academic tutor, music tutor, eldercare, consultant and freelance writer.

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