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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.
Key takeaway: Independent contractors are not employed by the company they contract with; they are independent as long as they provide the service or product agreed to. Employees are longer-term, on the company's payroll, and generally not hired for one specific project.
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.
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. If you are an independent contractor, then you are self-employed.
employed person is someone who works for themselves, not as an employee.
Generally, you are self-employed if any of the following apply to you. You carry on a trade or business as a sole proprietor or an independent contractor. You are a member of a partnership that carries on a trade or business.
If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Individuals Tax Center.
The basic difference between these two terms is that self-employment tax is paid by self-employed individuals, while employment taxes are paid by employees and their employers.
The law does not require you to complete a contract with your self-employed or freelance workers - a verbal contract can exist even when there is nothing in writing.