• Skip to primary navigation
  • Skip to main content
Good Financial Cents®
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
  • Make Money
    • Get Money Now
      • Ultimate Guide to Making Money
      • Need Money Now
      • Get Free Money Fast
      • Make Money Fast
      • Make $1K Per Month
      • Make $100 Per Day
    • Control Your Destiny
      • Self Employed Jobs
      • Make Money from Home
      • Hobbies That Make Money
      • How to Become a Freelance Writer
      • Small Business Ideas to Start
      • How to Become an Independent Contractor
      • Best Online Jobs
    • Passive Income
      • Passive Income Ideas
      • Multiple Streams of Income
      • Extra Income
      • Residual Income Ideas
      • Learn to Sell e-Books
      • Make Money on Facebook
      • Make Money on Tiktok
      • Best Online Survey Sites to Make Money
    • Explore More
      • Best Side Hustle Ideas
      • Make Money for Teens
      • Best Online Colleges
      • Best Jobs No College Degree
      • Become a Millionaire
      • Careers for the Future
  • Manage Money
    • Best Of
      • Budgeting Tools
      • Personal Finance Software
      • Best Cashback Cards
    • Company Reviews
      • Personal Capital vs Mint
      • Personal Capital Review
      • SmartAsset Review
    • Guides
      • Buy or Lease a Car
      • What is Liquid Net Worth?
      • Setting Financial Goals
      • How to Budget
      • Ways to Save Money
    • Explore More
      • How Much Car Can I Afford?
      • Best Auto Refinance Companies
  • Invest
    • Best Of
      • Best Short and Long-Term Investments
      • Best Low Risk Investments
      • Best Online Stock Brokers
      • Best Crypto Exchanges
      • Best Short Term Investments
      • Best Long Term Investments
      • Best Trading Platforms
      • Best Investment Apps
    • Company Reviews
      • Lending Club
      • Robinhood
      • M1 Finance
      • Ally
      • TD Ameritrade
      • Fundrise
      • Betterment
      • Etrade
      • Wealthfront
    • Guides
      • Investing for Beginners
      • Investing Small Amounts of Money
      • Investing in Real Estate
      • No Money Down Real Estate
      • Bonds vs Stocks
      • Peer to Peer Lending
      • Best Hedges Against Inflation
      • Safe Bitcoin Investing in 2023
    • Explore More
      • Bitcoin vs. Real Estate
      • Betterment vs Wealthfront
      • Investing for College Students
      • Stock Market Alternatives
    • By Investment Amount
      • How to Invest $100
      • How to Invest $1K
      • How to Invest $2k-$3k
      • How to Invest $5K
      • How to Invest $10K
      • How to Invest $15k
      • How to Invest $20K
      • How to Invest $30k
      • How to Invest $50K
      • How to Invest $100K
      • How to Invest $200K
      • How to Invest $500K
      • How to Invest $1M
  • Taxes
    • Best Of
      • Best Tax Relief Companies
      • Best Tax Software
    • Guides
      • Federal Income Tax Guide 2023
      • Taxes and Cryptocurrency
      • How to Do Your Own Taxes
      • How to Invest Your Tax Refund
      • Hiring a Professional Tax Preparer
      • Tax Tips for Freelancers
    • Company Reviews
      • TurboTax Review
      • H&R Block Review
      • Taxslayer
      • Tax Act
  • Insurance
    • Best Of
      • Best Life Insurance
      • Best Home Insurance
      • Best Auto Insurance
      • Cheap Term Life Insurance
      • Car Insurance For Young Adults
    • Guides
      • Term vs Whole Life
      • Different Types of Car Insurance
      • Average Cost of Car Insurance
    • Explore More
      • Life Insurance Over 50
      • Life Insurance Over 80
      • $1 Million Life Insurance
      • $2 Million Life Insurance
      • $3 Million Life Insurance
    • Company Reviews
      • Banner Life Insurance
      • Ladder Life Insurance
      • Health IQ
      • Haven Life
      • Policygenius
      • State Farm Auto Insurance Review
  • Retirement
    • Roth IRA
      • Best Places to Open a Roth IRA
      • Best Investments for Roth IRA
      • 7 Roth IRA Secrets
      • Roth IRA Conversion Guide
      • Roth IRA Rules
      • Roth IRA vs Roth 401k
      • Are Roth IRA Contributions Tax Deductible?
    • 401(k)
      • 401(k) Limits
      • 401(k) to Roth Rollover
      • Is 401(k) Enough for Retirement?
      • Maxed Out 401(k): What's next?
    • Traditional IRA
      • Traditional IRA Rules and Limits
      • Traditional IRA vs. 401(k)
      • Simple IRA Rules
      • SEP IRA Rules
      • How Much Do You Need to Start an IRA?
    • Explore More
      • SEP IRA vs. Roth IRA
      • 457 Plan for Successful Retirement
      • 401a Rollover Rules
      • How to Retire at 50
      • How to Retire at 55
  • Banking
    • Best Of
      • Best National Banks
      • Best High-Yield Savings Accounts
      • Best Checking Accounts
      • Best Savings Accounts
      • Best CD Rates
      • Best Money Market Accounts
    • Company Reviews
      • BBVA
      • Synchrony
      • Wells Fargo
    • Explore More
      • 9 Banking Alternatives for 2023
      • What is a Credit Union?
  • Home
    • Best Of
      • Best Mortgage Lenders
      • Best Mortgage Refinance Companies
      • Best Home Warranties
      • Best Homeowners Insurance
      • Best VA Loans
      • Best Mortgage Rates
      • Best Moving Companies
      • Best Home Security
    • Guides
      • Home Buying Checklist
      • Online Home Appraisal
      • How Much House Can I Afford?
      • First-time Homebuyer Programs
      • How to Get Approved for a Home Loan
      • Save Money When Building a House
      • How to Save for a Downpayment
      • When to Refinance Your Mortgage
    • Explore More
      • 15 vs. 30-year Mortgage
      • Home Warranty vs. Home Insurance
      • Veterans United Home Loan Review
      • Quicken Loans Review
      • HELOC vs Second Mortgage
      • DCU Mortgage Review
      • Costco Mortgage Program Review
      • USAA Mortgage Loan Review
  • Credit
    • Best Of
      • Best Credit Repair Companies
      • Best ID Theft Protection Services
      • Best Credit Report Options
      • Best Bad Credit Loans
    • Guides
      • How to Build Your Credit Score
      • How to Raise Your Credit Score in 5 Months
      • How to Dispute Your Credit Report
      • Hot to Remove Collections from Your Credit Reports
      • How Identity Theft Destroys Your Credit Score
    • Explore More
      • What is a Good Credit Score?
      • What is a Bad Credit Score?
  • Debt
    • Best Of
      • Best Debt Consolidation Loans
      • Best Personal Loans
      • Best Student Loans
      • Best Student Loan Refinance
    • Guides
      • What is Debt Consolidation?
      • How to Get Out of Debt
      • How to Get a Personal Loan Approved
      • How to Pay Off Student Loans Faster
      • Should I Consolidate My Debts?
      • Should I File for Bankruptcy?
    • Company Reviews
      • Credible
      • Sofi
Advertiser Disclosure (How We Make Money)
GoodFinancialCents.com has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.

How to Become an Independent Contractor

Miranda Marquit | January 15, 2023

For years, I have been an independent contractor. I’ve grown my home business into something that earns a steady income for my family. In fact, I’m the primary breadwinner. Becoming an independent contractor is one of the most profitable small businesses to start this year.

how to become an independent contractor

As an independent contractor, I have a degree of freedom in choosing my own schedule, and even determining who my clients are. I’m also part of a segment of the workforce that is growing in demand. Many companies are turning to independent contractors because it can be less expensive. My hourly rate might be higher than the rates commanded by “regular” workers, but I save a company in other ways:

  • No benefits to pay
  • No overhead costs
  • No payroll taxes to pay

A few years ago, CNN Money pointed out that an employee working for $14 an hour actually costs an employer $20 an hour. While most of my clients pay more than $20 for a project, the reality is that they just have to pay me for the project, rather than continue to pay me day in and day out, and pay the other costs associated with maintaining a full-time employee.

What is an Independent Contractor?

An independent contractor is a self-employed individual who provides services to clients on a contract basis. They are not considered employees of the company they work for and are responsible for their own taxes, benefits, and insurance.

Independent contractors typically work on a project-by-project basis and are not bound by the same employment laws and regulations as employees, which can provide more freedom in terms of how they operate their business.

They have the ability to set their own schedule, work from anywhere, and choose the projects they want to work on.

However, they are also responsible for their own business expenses, such as equipment and office space, and they are not eligible for benefits such as health insurance or retirement plans that employees receive.

How Do You Become Self-Employed?

The independent contractor arrangement can be a win-win in many ways. If you are looking to become an independent contractor, either to replace your “day job,” or just to make a little extra money on the side, here are some steps you need to take:

1. Think of a Name for Your Self-Employed Business

Consider what services you will offer, and then pick a name that describes what you do. I call my business Miranda Marquit Freelancing. It’s straightforward, and you know — immediately — what is done and who is offering the services. If you want to offer graphic design or web development services, think of ways to include those descriptors in your business name.

Have a solid understanding of who you are and what you have to offer, and be able to clearly define what you do. I’m still tweaking my “elevator pitch,” but it’s coming along nicely. When you can encapsulate what you do, it’s easier to convince potential clients to hire you.

2. Choose a Self-Employed Business Structure and Get a Proper License

Next, think about how you want your business organized. My business is set up as a Limited Liability Company (LLC). I’m the general partner and my husband is the limited partner. Others, though, find that an S-Corp or C-Corp makes more sense for them. (Here’s a comparison of using LLC versus C-Corp.)

In some cases, it can even make sense to remain a sole proprietorship for a time. Consult an accountant or tax professional for more information about what might be most appropriate for you.

You should also get a proper business license. Your state or locality likely requires you to have a license, even if you are providing independent contractor services and making money of your own home. If you plan to have a LLC, LLP, or S-Corp., you definitely need a license. However, there are cases in which sole proprietors need licenses, too. Check the requirements, and make sure you abide by them.

3. Open a Business Bank Account

Even sole proprietors should keep business expenses separate from personal expenses. Open a business bank account to keep everything separate, and to improve your ability to keep good records. Many of the best checking account providers for consumers also have business accounts you can use.

This is a critical step that many new independent contractors miss. You must separate your personal money from your business money. If you are self-employed and someone sues you, and your money isn’t kept separately, then everything you have can be pulled into the lawsuit. Even if your new independent contracting business just made $200 this year and you have $50,000 in the bank together with that money, it can all be targeted in a lawsuit.

You need to keep good records so that you are prepared come tax time. Make sure that you are setting aside some money in your business bank account to help you pay quarterly taxes. Don’t forget that you will have to pay your portion of payroll taxes, as well as the employer portion. This is known as the self-employment tax. Organize your finances now so that you can avoid headaches later.

4. Advertise Your Independent Contractor Services

Finally, you need to get out there with your business. Let others know what you are doing, and how you can help them with the services you provide.

It helps to have a home on the web, so set up a web site. You can even write a blog. Post your resume and relevant samples online.

Use social media to promote your services and to connect to others. (Social media is one of the key ways you can advertise your self-employed services while still saving money for your small business.) If you are generous in the way you promote others, and if you offer insightful information and ideas, eventually potential clients will notice — and hire you.

 

The Bottom Line – The Skinny on Becoming an Independent Contractor

Becoming an independent contractor can be a rewarding way to work for those who value flexibility and independence. However, it is important to carefully consider the pros and cons before making the decision to become an independent contractor.

By understanding the steps and legal requirements, as well as finding clients, setting your rates and managing your expenses, you can help ensure a successful transition to being an independent contractor.

Remember, being an independent contractor requires self-discipline, hard work and good time management, but the rewards can be great!

FAQs Becoming an Independent Contractor

Is it worth it to be an independent contractor?

Being an independent contractor allows for more flexibility in terms of working hours, location and projects.

Independent contractors have the ability to set their own schedule, work from anywhere, and choose the projects they want to work on.

Additionally, independent contractors are not bound by the same employment laws and regulations that employees are, which can provide more freedom in terms of how they operate their business.

What are the disadvantages of being an independent contractor?

The main disadvantage of being an independent contractor is that they are not eligible for the same benefits and protections as employees, such as health insurance, retirement benefits, and unemployment insurance. Independent contractors are also responsible for paying their own taxes and may have to pay self-employment tax.

What are the legal requirements for becoming an independent contractor?

The legal requirements for becoming an independent contractor vary depending on the state and industry. In general, independent contractors are required to have a business license, register for taxes, and obtain any necessary permits or certifications. It’s important to consult with a lawyer or accountant to understand the specific legal requirements for your area and industry.

How to set your rates as an independent contractor?

Setting your rates as an independent contractor depends on a variety of factors such as the level of your experience, the cost of your expenses, and the market rate in your area. Researching the going rate for similar services in your area can help you to determine a fair rate for your services.

Facebook LinkedIn Twitter

About the Author

Miranda writes for several web sites and specializes topics related to finance, investing, and entrepreneurship. She has been mentioned in numerous media. Her blog is Planting Money Seeds


You Might Also Enjoy

How to Make Money Without a Job: 26 Ways to Earn Money Outside the 9-5

How to Make Money Without a Job: 26 Ways to Earn Money Outside the 9-5

37 Best Side Hustle Ideas for 2023

37 Best Side Hustle Ideas for 2023

How to Make Money in One Hour: 25 Ways to Earn Cash Quickly

How to Make Money in One Hour: 25 Ways to Earn Cash Quickly

The 22 Best Passive Income Apps to Make Money [While You Sleep in 2023]

The 22 Best Passive Income Apps to Make Money [While You Sleep in 2023]

25 Best Ways to Make Money Online from Home in 2023

25 Best Ways to Make Money Online from Home in 2023

59 Ways to Make $100 Per Day (Super Fast)

59 Ways to Make $100 Per Day (Super Fast)

4 Comments

  1. Stephen Hueston May 11, 2022

    Hello im trying to start my own handyman business I got my ein tax number and my business certificate I’m in the middle of getting my LLC on line it’s all filled out just waiting to finish my web site and I have opened a business account with my bank I’m out of work on leave of absence for recovering from carpal tunnel surgery but I work as an employee for a glass company I want to start my own handyman business I’m very talented and have done lots of work for friends for free they said I should start my own company but it’s scary and need help taking the proper steps please help

    Reply
  2. [email protected] June 10, 2013

    I’ll hopefully be referring to this in the near future–great insight. Thank you!

    Reply
  3. snarkfinance June 10, 2013

    This is a great way to make side income or start a side business, however it is incredibly important that a person marketing themselves as an independent contractor be very, very competent and capable of performing the work. This business is based on references.

    Reply
  4. David @my2centopinion June 10, 2013

    This is great advice for people getting started in business for themselves. These tips will put many new entrants ahead of the game.

    Reply

Leave a Reply

Cancel reply

  • Make Money
  • Manage Money
  • Invest
  • Taxes
  • Insurance
  • Retirement
  • Banking
  • Home
  • Credit
  • Debt
  • About
  • Contact
  • Do Not Sell My Personal Information
  • Facebook LinkedIn Twitter

© 2023 Good Financial Cents®. All Rights Reserved. | Privacy Policy | Disclaimer | Licenses & Disclosures

All written content on this site is for information purposes only. Opinions expressed herein are solely those of AWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All third party trademarks, including logos and icons, referenced in this website, are the property of their respective owners. Unless otherwise indicated, the use of third party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between Good Financial Cents® and the owners of those trademarks. Any reference in this website to third party trademarks is to identify the corresponding third party goods and/or services.