Freelancer vs Sole Proprietor

Which route should you take for your business?

TLDR TL;DR Summary

This is a common dilemma one will face when one decides to go to the next stage, from employment.
But never fear. I have been there. Many have been there. Let me shed some lights for you to answer this question yourself better.

Hiring Employees

This is the main difference. Typically, a freelancer does not hire employees. He is the king, he is the slave. Or rather: he is the management, he is the worker. Not so for a sole-proprietorship. Though a sole-proprietor CAN be a solopreneur as well, he decides to be a sole-proprietor mainly to hire employees.

Because, to do the paperwork for employees, he needs to be a sole-proprietor. Even a freelancer, when he decides to hire workers, he too, have to move on and become a sole-proprietorship.

Business Name

A freelancer doesn’t have to brand or name himself. Just call himself a freelancer writer, or freelance web developer, will do. Not so for a sole-proprietor. He needs to register a name. Thus begins his stressful brainstorming process of finding something good and apt for his business.

Of course, branding comes with logo and sometimes slogan as well. Maybe this is why the term “freelancer” has the word free in it. Because he’s “free” from all this stress and extra fluffs.

Protection

Typically a sole-proprietor is protected in some scope. Whatever happens in business, stays in business. This includes all liabilities as well. Sometimes, this extends to insurance coverage as well.

Not so for the freelancer. He has to take a personal insurance for all his protection needs, be it personal or related to his business.

Which one is right for you: Freelancer or Sole Proprietor?

I answer this based on my own experience. When you are going out into the big ocean, you start by just dipping your toes first. So, it is best, both for you and your clients, that you identify truthfully as a freelancer and do your best efforts in your software development work.

Let me tell you, again from my experience. Many people started this race together with me. I’m still running the race. Many have dropped out. In other words, many people who started as software developers are no longer so. They tried, they concluded it is not for them, and they quit.

It’s not wrong. At least, they tried.

So, this concept of freelancing allows you to do just that. Try and fail, with as less cost and liability as possible.

OR, do try and realize that this was what you were meant to do! Know that software development is your calling in life. And do that for the rest of your life. Like me.

Cheers and all the best in your business.