If you like the idea of making a living by working for yourself, you have one of two options – self-employment or starting a small business. Now of course in both cases, you will be self-employed, but the two options do differ by virtue of the sector you are working in and the ambitions you have for yourself. You might have an idea for a product or service that you believe will change the world, and you have a passion and devotion to the project that you foresee resulting in a company that employs multiple staff and has a turnover running into millions. Or you might just want to spend your days writing or painting in your own home, pursuing your artistic talents and hoping that you can make enough money from them to live a comfortable life.

What is the difference?

In terms of legalities and liabilities, the chief difference is whether you employ staff and contractors. If you don’t, you are self-employed, or a sole proprietor. If you do have employees or use contractors to work for you, you’re required to have an Employer Identification Number and must define your business as one which is liable for associated staff benefits and company contributions. Other than that, the main difference is in your perception of what you do.

First decisions :

Before you undertake any form of self-employment, you need to have a financial plan. You need to know how much it will cost to set yourself up in the first place, and have a realistic projection for when you will start to make money from your project. If you simply want to work for yourself, have some flexibility regarding hours and income, and minimal interference from supervisors, working as a freelance for a business like Uber Eats is ideal. There will be minimal overheads, and you should be provided with a regular supply of work. You may want to use your own talents as a basis for your income, for example by offering your services as a tradesman, or a tutor. In this case, you would need to budget for equipment and marketing, but you may well not need separate premises or stock for this type of work. You need to calculate how much you must make in order to cover your living expenses and balance how many hours you wish to work against your financial responsibilities. If you want to start a business from scratch, there are some enterprises which require staffing and a substantial degree of investment right from the start. For instance, you can’t run a retail store by yourself, and to buy in sufficient stock to get going will take a large injection of capital. For this to work, you are looking at considerably higher risk levels and the acquisition of funding to realize your dream.

Many entrepreneurs start by freelancing, building up a solid reputation and the confidence to go further. This, in turn, can lead to the expansion of the one-person-band to a small business with employees and could represent a safer, if slower, route to business success.

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