Owning a business or being self-employed: what's the difference and what's better for you

Despite the challenges and constantly changing economic conditions, the number of people deciding to take a chance and employ their talents, skills, and creativity to launch their own business.

When they get to the point of developing a business plan, they have to think not only about the concept of a product/service they’re going to provide, but also about the structure of their future business endeavor. Many start off as self-employed proprietors and eventually develop into small businesses or medium-scale companies. But, those who’re not engaged in business activities yes may not draw the difference between the terms ‘self-employed’ and ‘business owner. However, beginning entrepreneurs need to understand the meaning behind them, discover the benefits of each of them to determine which organization form fits the scope of their start-up better.

The difference between being self-employed and owning a business

Self-employed entrepreneurs are qualified professionals, who operate as sole proprietors and conduct their business activities on their own. They deliver services, perform tasks, produce and sell products while dealing with administrative, financial and marketing tasks at the same time. They’re the only ones who perform the job and carry out other business activities; therefore, they’re fully responsible for the success or the failure of their ventures. They enjoy the freedom of deciding what work to take up, when and how to do it. A lot of home improvement contractors and people providing similar services (babysitters, housekeepers, plumbers, etc.) operate as self-employed entrepreneurs

When it comes to the financial side of the operation and paying taxes, they usually pay them through Self Assessment, which is a lot easier than PAYE. Unless they conduct their business activities in their spare time and have another job, they may only count on their revenue without receiving sick and holiday pays.

As they don’t have any employees, they don’t feel the pressure of being responsible for their well-being and making sure that the business generates enough revenue to cover staff salaries and owner’s profit. Self-employed entrepreneurs don’t have to deal with legal and financial sides of hiring employees, such as paying fees for receiving licenses and permits allowing hiring employees, paying employee’s taxes, providing them with health insurance, dealing with dishonest workers who cause customer dissatisfaction, etc.

When you provide for your living as a self-employed professional, you no longer have a boss that directs your activities. You get to control your own operation without experiencing the burden of being someone’s boss as small business owners do.

Even though you won’t get paid on your sick days, you will be able to determine your own schedule and take a day or two off whenever you have to without asking for someone’s permission and having to show up for work barely being able to move and breathe when your boss decides that you don’t deserve to get better in the comfort of your own home. Even small business owners can’t enjoy such a luxury, as they still have to administer the operation of their business, oversee their employees and make important decisions no one else is entitled to making. Furthermore, they often have to step down from executing the work their business specializes in and engage in administrative work only, which is not something every professional who loves his work is eager to do. 

The most noticeable downside of being self-employed is that you’re quite limited when it comes to the amount of work you can take up and, consequently, the amount of money you’re able to make. When you’re the only person providing the services, you can’t accept all customer requests, which will inevitably lead to regrets due to the missed opportunities and revenue. Eventually, you’ll have to seek additional support in the form of extra pairs of working hands. That’s when setting up a limited liability company will be a reasonable decision allowing you to expand your activities, develop a brand and fulfill entrepreneurship dreams.

Lastly, there're certain spheres (like auto repair business or roofing installation and repair), where self-employment isn't even an option, as it takes a team of workers to perform a certain task.

What should you choose?

As a conclusion, I would like to note that self-employment is also a great transition between working for someone and entering the business environment as an independent player.

Moreover, choosing self-employment as the starting point of your business development and moving onto the next stage – business ownership – after a few years of successful, profitable operation is the safest option any beginning entrepreneur may choose. This way, you’ll get to test your entrepreneurship skills, discover if the product/service you provide manages to find its niche on the market and receive positive customer response, gain experience and build your own business connections without risking too much money and being responsible for the financial well-being of other people.

However, unlike small business ownership, self-employment is also a safe place that doesn’t allow reaping strong financial gain. Creating your own business model, finding a micro niche that’s not too crowded by other entrepreneurs, launching a unique start-up that fills in a local market gap and, therefore, is bound to attract customers is the ultimate way to generate increasing profit and achieving greater results.