Do you consider yourself to be the entrepreneurial type who loves adventure?
If so, working as an independent contractor may be the right career path for you.
Independent contractors are also referred to as freelancers, consultants, free agents, or even contractors.
No matter the label, they are all considered self-employed individuals, mainly working remotely.
However, working as an independent contractor comes with advantages and drawbacks that you should be aware of.
So, before you take the dive, this guide will help you determine whether working as an independent contractor is the best route for you.
Table of Contents
Pros of Being an Independent Contractor
1. Be Your Own Boss
If you’ve always dreamed of being your own boss, you can enjoy this benefit and more by becoming an independent contractor.
For many, this is the driving factor for becoming an independent contractor or freelancer.
And, if you happen to be a contractor working out of that employer’s location and side by side with employees, you are still independent of them.
They are not your supervisors and may not give you the same orders as they would if you were a regular employee.
2. Control Over the Work you do
Being able to have control over the work you accept is another advantage of being an independent contractor.
Even though you and your client decide on the final product, you will have the final say on where, how, and when the work is completed.
The main difference between an independent contractor and an employee, according to the Common Law Rules, is the amount of independence and control permitted by the client.
3. Potential to Earn More Money
Becoming an independent contractor means you have the potential to earn more money than you would as a regular W2 employee.
It’s a proven fact that companies are more willing to pay additional fees for independent contractors.
This is mainly because it keeps companies from having to commit to anything long-term or pay out benefits, including Medicare, unemployment, healthcare, and social security.
4. Greater Tax Benefits
Everyone loves a good tax refund. Independent contractors have the ability to make deductions on their tax returns for any expenses they’ve incurred over the past year.
It’s also true that independent contractors may have more expenses to deduct compared to employees.
In addition, independent contractors are required to withhold their local, state, and federal taxes on their own.
This is another difference between independent contractors and regular employees.
5. Flexibility Over Schedule
Another pro of working as an independent contractor is having flexibility over your working hours.
Unlike regular W2 employees, you are not required to put in a full 8-hour shift.
You have full control over how much or how little you’d like to work.
However, you must still adhere to deadlines.
Having control over your work schedule provides you with the benefit of tending to your family, traveling, and much more.
6. Ability to Work From Anywhere
The clients you work for have no say over the location you choose to work in.
This is another advantage of being an independent contractor.
You have the freedom to choose what setting to work out of that best fits in with your lifestyle.
Most independent contractors choose to work from home, but you don’t have to.
You can work while traveling while sitting in a coffee shop, or even in a coworking space.
Not having to commute every day to work also provides you with additional time to spend with your family.
7. Ability to Gain More Experience
Becoming an independent contractor provides you with the ability to gain more experience.
This, in turn, helps you stand out in your particular field.
These new skills that you develop as a contractor are ones that you wouldn’t be able to develop if you were working as a regular employee.
Moreover, you will be able to work with a variety of clients on different projects.
Having more than enough experience across many industries is appealing to employers.
Cons of Being an Independent Contractor
1. Withhold Taxes
One of the biggest disadvantages of being an independent contractor is that you must withhold your taxes.
This can be seen as a huge inconvenience for many.
Employers enjoy hiring contractors because they can avoid the responsibility of paying for benefits and taxes.
These things fall on the contractors.
You are responsible for withholding your state, federal, and local taxes.
It’s also possible that you may be required to submit your estimated quarterly taxes to the IRS.
If you don’t like the responsibility of withholding taxes, a job as an independent contractor may not be ideal for you.
2. Must Cover Your Benefits
Independent contractors are also responsible for covering their health insurance and other benefits.
In most cases, independent contractors are not eligible to receive state unemployment compensation because of their self-employment status.
In addition, contractors are required to fund their retirement accounts.
Moreover, rates for health insurance are typically higher than company rates.
It’s also possible for clients to require you to purchase liability insurance.
These things can be a huge turn-off for many looking to become independent contractors.
3. Purchase Tools & Equipment
Another downside of being an independent contractor is that you’ll be required to cover the costs of your tools and equipment.
In addition, the company you’re working for will not reimburse you for these out-of-pocket expenses.
So, while you are determining rates, you should also consider these additional expenses.
It’s important for your clients to not provide any tools so as not to misclassify you as an independent contractor.
This may be a dealbreaker for many, especially if you do not have the start-up funds to get going.
4. May be Required to Obtain a Federal & State ID Number
If you are an independent contractor who uses your social security number as your taxpayer ID, you may run into issues getting hired.
Many employers are skeptical about those who do this.
This is mainly because it may question whether the work you do is that of an employee or contractor.
It could raise a red flag to the IRS if an employer reports your earnings using your social security number.
The last thing you want to receive is an audit from the IRS.
5. Limited Job Security
Employees indeed earn a more stable income every month compared to independent contractors.
An independent contractor’s work varies throughout the year.
There may be a period in which you are extremely busy, and then everything gets quiet.
It’s possible to find a steady client or two as a contractor, but you have to consistently be on the lookout for more work.
The work that you come across may be seasonal or long-term.
Either way, if you’re still considering becoming an independent contractor, you should be well-prepared for this, so there are no surprises.
6. Restricted Access to Resources
As an independent contractor, it won’t be as easy to access resources as you would as a regular employee.
There will be times when you need to access certain resources or tools but are not able to.
In addition, the company that you’re working for may not reimburse you for such expenses if you go out of your way to access the tools you need.
Before starting your work, you must make sure that you have access to all the resources and tools you need.
This will have a direct impact on the rate you charge clients.
7. Difficulty Finding Balance
While this may not pertain entirely to you, many contractors have difficulty finding the right balance between their personal and work lives.
This is mainly due to the workload, which tends to differ from day to day and week to week.
Not having a set schedule could present a challenge for many.
You must be self-disciplined, as your workload constantly changes.
If you can adjust without any issues, this may not present any challenges for you.
14 Pros and Cons of Being an Independent Contractor – Summary Table
| Pros of Being an Independent Contractor | Cons of Being an Independent Contractor |
|---|---|
| Be Your Own Boss | Withhold Taxes |
| Control Over the Work you do | Must Cover Your Benefits |
| Potential to Earn More Money | Purchase Tools & Equipment |
| Greater Tax Benefits | May be Required to Obtain a Federal & State ID Number |
| Flexibility Over Schedule | Limited Job Security |
| Ability to Work From Anywhere | Restricted Access to Resources |
| Ability to Gain More Experience | Difficulty Finding Balance |
Should You Become an Independent Contractor?
Working as an independent contractor can certainly be rewarding, as it provides you with the opportunity to be your own boss.
You can also select the clients you wish to work for and work remotely.
However, becoming an independent contractor also means taking on more responsibility than you may be ready for.
You must be prepared to cover your Medicare taxes and social security.
You may even have to come out of pocket to cover the equipment that you need.
If this all sounds worth it to you, you could be on your way to a successful career.
