According to the United States Bureau of Labor Statistics, there were almost 17 million self-employed workers in the country as of September 2025, a workforce about 10% the size of full-time and part-time workers combined. But what does it mean to be self-employed? Read on to better understand this unique labor status.
What does it mean to be self-employed?
When most people think of self-employed workers, they picture a handyman who works for themselves, or an independent accountant working out of their home office. But the truth is that there are all kinds of self-employed workers in the country, doing jobs in every field imaginable. Some work alone, others work in teams with others, and still more have businesses that actually employ other workers.
Self-employed workers are their own employers; that's their defining feature. Although they're beholden to their clients or customers, ultimately, they decide who those people are or what businesses they choose to work with. There are specific rules about how they must be treated when working for said clients or customers, which we'll discuss later in this article.
What kinds of self-employment are there?
There are three main types of self-employment:
- Independent contractors. Independent contractors are the simplest type of self-employed individual. They work for themselves, alone, on projects for clients and customers. These are people like freelance marketers, solitary electricians, and freelance journalists.
- Sole proprietors. Sole proprietors own actual businesses by themselves. They will generally have employees or independent contractors working for them to complete various tasks. Under a sole proprietorship, the owner and the business are legally merged, so if something happens to the business, it can spill over into the sole proprietor's life, too.
- Partnerships. Partnerships are businesses managed by two or more self-employed individuals and operate much like sole proprietorships. However, a partnership may not have any employees or contractors working under the management layer, since the partners may be able to divide all the tasks that need to be completed between them. Partnerships may also involve "silent partners" who are essentially just investors in the business.
Benefits of self-employment
Self-employment can have a lot of benefits that come with it, including more work flexibility, the ability to set hours you'd prefer to work, and being able to set your own prices and payment terms. However, the life of a self-employed individual is often idealized, and other benefits like "unlimited earning potential" and "total control of your work" are tossed around.
The reality of life for self-employed individuals is that there's a give-and-take with clients. If you stand rigid in your demands for your working conditions and hours, you may never land a client, and if you believe you can earn unlimited amounts of money, you'll end up burning out. You have to think of clients as members of your team, and work together to create environments that work for you both.
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Determining if a worker is self-employed
To protect workers from abuse, the IRS has very strict tests to determine if a worker is self-employed. This protects employees from being paid like independent contractors, for example, and protects independent contractors from being treated like employees.
The tests fall into three categories:
- Behavioral. These tests ask whether the company controls or has the right to control how the worker does their job. If they do, they're not self-employed.
- Financial. This section asks if the business aspects of the worker's job are controlled by the employer. Do they dictate how the worker is paid, how expenses are reimbursed, and even who provides the tools and supplies needed for the job? If they do, it's likely that person is an employee.
- Type of relationship. This last section is the most complicated. It asks about contracts or benefits the worker may be receiving, like pensions or insurance plans, as well as whether the work is a key aspect of the business. Although a self-employed individual can be used for key aspects of the business, it must be done in a very specific way to remain legal.
The point of these categories is to determine who has the right to control the worker, through both direct chain of command and through indirect means, like pay and benefits. There's no magic formula for which of these items should or should not be checked, but the more control the employer has over the worker, the more likely they should be classified as an employee and paid as such.
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