It cannot be disputed that how you describe yourself as an individual can influence the future work you get, the insurance you are charged and even your salary. Are you a contractor, a consultant, a freelancer or a small business? This guide helps you identify who you are and why it matters.
Can You Call Yourself A Freelancer?
A freelancer can be regarded as a flexible professional who can work through a contract or without it. Freelancers can work from home or wherever they find themselves the most productive. You can work on a sandy beach or a beautiful mountain range while on holiday. You are not even required to get out of bed to accomplish your work. You can simply lie down with a laptop in your lap and work away. If you are a writer without employment in the conventional PAYE scheme, you are a freelancer.
Can You Call Yourself A Contractor?
There is a certain stereotype where contractors are concerned. They are considered to be bespectacled and geeky individuals who work in IT-oriented roles in offices. It is easy to confuse oneself between being a freelancer and a contractor. To put it simply, contractors work or are employed on longer contracts while freelancers are not. Freelancers usually do not work on contracts, and even if they do, these contracts tend to be smaller. Also, contractors do not work from home while freelancers do.
People tend to use the terms contractors and freelancers interchangeably, and it is important to know the difference between the two so that you can categorize who you are as a working professional. Simply put, contractors usually work in the field of IT while freelancers work in the field of media. Contractors are also sometimes called freelance consultants when they become consultants.
Can You Call Yourself A Consultant?
Working professionals often get confused between calling themselves a contractor or a consultant and even wonder if it matters. Yes, it does! As mentioned above, calling yourself one or the other will influence the kind of work you get offered, your charges, how much you get paid, how you get paid, your life cover, insurance charges and much more. The terms ‘consultant’ and ‘contractor’ are not mutually exclusive. Typically, consultants evaluate the needs of their clients and then offer expert advice on the subsequent steps to be followed.
On the contrary, contractors carry out the work themselves rather than simply providing information. Hence, while contractors are paid for their work, consultants get paid for their know-how and expertise. Although the difference between the two might seem quite feeble, you can still use this parameter to distinguish between the two.
Can You Call Yourself A Small Business?
Since both contractors and freelancers have their own businesses, they can be called a small business. Some even class themselves as SMEs or Small to Medium Enterprises. However, it is not factually correct as a company comprising a single individual cannot be referred to as an SME. You can check the Companies Act 2006, specifically sections 382 and 465 to check what constitutes a small business. According to the law, an entity that has a turnover of up to £6.5 million and a balance sheet of up to £3.26 million with 50 or fewer employees constitutes a small business.
Can You Call Yourself A Micro-Business?
Micro-business is a term that is often used in an informal sense. It can be considered as similar to a small business. That said, a micro-business refers to all those companies that earn up to £2 million on a yearly basis with ten or fewer employees. Hence, a contractor or a freelancer can also be called as a small business or a micro-business, although this definition might vary from person to person. For instance, banks and energy companies have their own set of interpretations regarding what makes a small business.
Why Do These Definitions Matter?
You might be wondering if it really is important what you call yourself in the professional world. Yes, it is! Although some titles can be interchangeable, you can deduce the title you should go by the industry you belong to or your field of work. It also depends on how you wish to project your work and services to your clients. Remember that your choice will have an impact on your charges or even things like insurance cover.
Regardless of what you call yourself, in case you need support or guidance, you can get in touch with us. We offer expert accountancy support and can help you streamline your finances when you are just embarking on your professional trajectory. Check out our range of services at Target Accounting and allow us to be a part of your journey in the professional world!