What does it mean to be self-employed?

Self-employment can sound like the dream. No boss. No clock-in. No company politics. But once the excitement wears off, you're left with every decision, responsibility, and risk resting squarely on your shoulders. That is the tradeoff. In this guide, we’ll take a closer look at what self-employment really means and how to handle it well.

What is self-employment? 

You’re self-employed when you earn money by running your own business, trade, or profession. You aren’t an employee of someone else. You work for yourself. 

That might mean you’re a freelancer, an independent contractor, a consultant, or the owner of a small business. What they all share is autonomy. You get to call the shots, but you also have to cover every detail. 

Starting a Business vs. Contracting 

Not all self-employment looks the same. Some people launch full-scale businesses, while others take on independent work through contracts. Both fall under the self-employed category, but the experience is different. 

If you're starting a business, you're likely creating a long-term operation with branding, systems, and potential employees. It usually requires business planning, legal setup, and state registration. 

If you're working as an independent contractor, you're still self-employed, but typically without the same overhead. You deliver services under a contract and keep more control over when and how you work. 

How does self-employment differ from a regular job? 

Working for yourself means you don't have the same built-in safety nets you might get with traditional employment. There’s no employer-sponsored healthcare, retirement matching, or PTO. You have to build all of that yourself. 

Some key differences: 

• Income flow: Self-employment income tends to fluctuate. You’ll need a plan to manage slower months. 
• Benefits: You must secure your own health insurance and retirement accounts 
• Taxes: You owe both the employer and employee share of Medicare and Social Security. That’s 15.3 percent total. 
• Support: You’re the HR, the tech support, the finance team, and the operations department

Running your own show can be rewarding, but it requires a level of structure and planning that surprises a lot of first-timers. 

Handling Taxes and Legal Obligations 

Taxes hit differently when you’re self-employed. You’re responsible for tracking income, estimating payments, and claiming deductions. 

You’ll need to file using Schedule C and make quarterly payments to the IRS. You also need to know what qualifies as a deductible business expense. Things like software, mileage, and home office costs can all add up to meaningful savings. 

If you register your business with the state, you may need a local business license or a federal EIN. The rules depend on your industry and location. 

Getting the Right Help 

You do not have to do all of this by yourself. In fact, you should not. 

Working with a professional can help you: 

• Decide on the right business structure and register it properly 
• Set up clean books and systems for tracking income and expenses 
• Avoid common tax mistakes that could cost you later 

It also helps to have someone you can ask when you are not sure if an expense is deductible or when a client requests a contract revision. 

The Bottom Line 

Self-employment gives you freedom, but it also puts you in charge of everything. If you’re serious about making it work, you need to understand the legal and tax requirements from the start. A little help early on can save you major stress later. 

Looking for support? DiMercurio Advisors works with business owners, freelancers, and independent contractors every day. We’ll help you get set up the right way.