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Becoming an independent contractor is one of the many ways to be classified as self-employed. By definition, an independent contractor provides work or services on a contractual basis, whereas, self-employment is simply the act of earning money without operating within an employee-employer relationship.
Some 1099 workers only work on one project at a time, but many serve multiple clients, providing a service within their expertise. Independent contractors, such as freelancers and consultants, are self-employed, so they're business owners themselves.
Simply put, being an independent contractor is one way to be self-employed. Being self-employed means that you earn money but don't work as an employee for someone else.
People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.
An employee is on a company's payroll and receives wages and benefits in exchange for following the organization's guidelines and remaining loyal. A contractor is an independent worker who has autonomy and flexibility but does not receive benefits such as health insurance and paid time off.
Make sure you really qualify as an independent contractor. Choose a business name (and register it, if necessary). Get a tax registration certificate (and a vocational license, if required for your profession). Pay estimated taxes (advance payments of your income and self-employment taxes).
What Is an Independent Contractor? An independent contractor is a self-employed person or entity contracted to perform work foror provide services toanother entity as a nonemployee. As a result, independent contractors must pay their own Social Security and Medicare taxes.
Independent contractors provide goods or services according to the terms of a contract they have negotiated with an employer. Independent contractors are not employees, and therefore they are not covered under most federal employment statutes.
All work required of the contract is performed by the independent contractor and employees. Independent contractors are not typically considered employees of the principal. A "general contractor" is an entity with whom the principal/owner directly contracts to perform certain jobs.