Created on: March 01, 2013 Last Updated: March 02, 2013
Self-employed people have the freedom to choose their own work projects and make their own decisions, but there are pros and cons to being an independent contractor that everyone should know about. People who work for an employer should know the pros and cons of working as an independent contractor in case they decide to strike out on their own and be independent agents. Self-employed people also need to balance the pros and cons of working as an independent contractor so that they understand what responsibilities they need to address with regards to managing their livelihoods.
If you are considering working as an independent contractor a major pro of working as one is the ability to choose work assignments. You can work as an independent contractor in a wide variety of industries. Teachers, construction workers, network marketers, journalists, actors, and hairdressers are just a few examples of workers who can work as independent contractors. A music teacher who works as an independent contractor for a music school can take on as many or as few students as he chooses to teach. He can also set his own work schedule and does not need to ask the employer for time off work to go away on vacations. As an independent contractor you get to fit your work schedule around your personal life instead of struggling to fit your personal life around an employer’s work schedule for you that you have no authority over.
The ability to earn an unlimited income is another benefit of working as an independent contractor. Employees who work for a company are given a set salary and they don’t have control over whether or not the company issues them raises on their salaries. Independent contractors are free to make as much money as they want to because they can set and negotiate their rates of pay. As an independent contractor you can work where you want to; from your home, outside of your home, or even in another country if you want to spread your wings.
Although there are many benefits to working as an independent contractor, there are some cons too. As an independent contractor you are responsible for your own taxation and must be very diligent about keeping receipts, tracking your yearly income, and collecting money owed to you by clients and customers. Employees don’t need to spend as much time tracking their income the way that independent contractors do because employers take care of those details for them. Independent contractors can also be subjected to more tax audits because they will need to prove their incomes and expenses.
Independent contractors don’t get paid vacation days and they are responsible for covering their own medical and dental benefits. If you decide to work as an independent contractor you should set aside money in a bank account separate from your main account. Try to save at least ten percent of all income earned, put that money into the separate bank account and use that account as an emergency fund. The emergency fund can be used for unforeseen events that could occur in the future like medical expenses, unexpected tax audits, and business necessities. Independent contractors should consult with accountants who specialize in helping independent contractors make the most of the money they make and plan for the future.
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