Do you want to learn how to become an independent contractor? Excellent! There’s a ton of flexibility when it comes to working for yourself, and we’re excited to explain the steps to getting started in 2023.
Independent contractors can run side hustles, freelance, and more. They work for themselves on a contract basis, and it provides the freedom to create your own schedule, choose who you work with, and control your income. While there are serious benefits, you need to take the right steps to set yourself up for future success.
First, What is an Independent Contractor?
Independent contractors are people who work for themselves and contract out their services to the public. They are considered self-employed, work on a contract basis, and are responsible for their own taxes, health insurance, retirement, and any other benefits offered by a full-time employer.
As an independent contractor, you work on a project-by-project basis, set your own schedule, and can work for a variety of clients. Most independent contractors are also able to choose where they work, and some have the freedom to set their own rates.
Because independent contractors aren’t bound by employment laws and regulations, they are responsible for any equipment or expenses that an employer would generally pay for.
How to Become an Independent Contractor in 2023
Becoming an independent contractor can offer a significant amount of freedom and flexibility, and it’s a great way to make money on the side of your day job or find an entirely new career path. The steps below will help you on your journey:
Step 1: Decide on a Business Idea
Before you can name your business or truly start working as an independent contractor, you need to decide on a business idea. Independent contractors can be freelancers, electricians, florists, painters, mechanics, delivery drivers, landscape designers, virtual assistants, house cleaners, and more.
If you’ve gotten to the point where you’re researching how to become an independent contractor, there’s a good chance you have an idea in mind, but read 20+ Online Business Ideas if you’re feeling stuck.
Step 2: Name Your Business
Your business’s name is how you're known to your clients and customers. Ideally, you choose something that you won’t change in the future, that’s easy to recognize, and tells potential clients about your business.
When I started my proofreading and editing business, I went with Ariel Gardner Editing because it quickly described my services. It’s common, especially among freelancers, to include your name in your business name.
Ultimately, you want something that doesn’t require a long explanation. Remember that you will have to market your business, and you don’t want potential clients to get hung up on a confusing name.
Learn more in How to Start a Business With No Money.
Step 3: Register Your Business Entity
There are different types of business structures for independent contractors. The most common option is registering as an LLC, but you can also choose an S-Corp or partnership.
Which you choose determines how you pay taxes and accept liabilities. Many independent contractors choose a sole proprietorship, meaning you’re the sole member of an LLC, but you can consult a tax professional to learn more about your options.
Learn more in S-Corp vs. LLC: What’s the Difference?
Step 4: Acquire Licensing for Your Business
Most states require independent contractors to acquire a proper business license, and the licensing process varies by the type of business you start and where you live and work.
For example, in Missouri, where I live, you can obtain a general business license, but for auctioneers, hotel owners, bail bondsmen, liquor sellers, and tow truck drivers (to name a few) require additional licensing.
The point is to research the licensing requirements in your state and municipality.
Step 5: Open a Business Bank Account
It’s incredibly important to keep your business finances separate from your personal finances, and the easiest way to do that is to set up a separate business bank account.
This is the account you’ll use to accept payments and pay for any business expenses. This makes for easier recordkeeping, which means you’ll be better prepared for tax time. Speaking of taxes, this is the account you’ll use to pay your self-employment taxes.
There are more options for business bank accounts than ever before, many with low to $0 fees, cash bonuses when you open an account, and user-friendly banking apps.
Step 6: Start Marketing Your Independent Contractor Services
Now that you have your business all set up, it’s time to start advertising your services! This part can be both fun and stressful because you may have to learn new marketing strategies.
How you market your services likely depends on what type of independent contractor you are. Here are some of the most common options:
- Create a website or blog for your business: Many independent contractors create websites to detail their services, exhibit a portfolio of work, and even create helpful articles and blog posts that explain more about their industry. Learn how to start a blog here.
- Digital marketing: Social media marketing is one of the most affordable and effective ways for small businesses to target a wide audience of potential customers and clients. Learn more here.
- Email marketing: Many newbie independent contractors aren’t thinking about their email list, but it’s never too early. Free services, like MailChimp, make it easy for small businesses to collect email addresses and use them to keep in touch with customers and clients.
- Freelance platforms: For freelancers, freelance websites, like Upwork and Fiverr, can be a huge part of how you find work. You’ll want to research the fees, how you’re paid, and rules of working on each before you get started. Most independent contractors find one or two that work well for their business rather than using all of them.
Benefits of Becoming an Independent Contractor
Becoming an independent contractor has been one of the best decisions I’ve ever made, and I know that’s true for many, many other people as well. There’s independence, financial freedom, and pride in doing what you love.
But let’s look at top benefits of learning how to become an independent contractor:
Tons of Freedom and Flexibility
Independent contractors are self-employed, and when you are your own boss, you get to choose when you work. This allows you to create a schedule that works with your lifestyle, whether you are a student, a parent, have a full-time job, etc. For those who work remotely, you can work remotely from the beach, at home, while traveling, and more.
Choosing when and where you work gives you a ton of freedom. But make sure you keep yourself motivated and on-task.
Work with a Variety of Clients
Because you’re not employed by a single employer, you get to work with a wide range of people from all different backgrounds. You might get to work with seasoned solopreneurs, innovative companies, or small mom-and-pops. There’s something to learn from all of your clients, and the more you work, the more you’ll understand about how you want to run your own business.
Part of working as an independent contractor is constantly being on the lookout for new clients and learning how to retain the clients you currently have. The best approach is to be versatile, always deliver high-quality work, and don’t be afraid to ask for referrals.
Control Your Own Growth
Not all independent contractors have the same business goals, and that’s one of the best parts about doing business this way — you can scale as much or as little as you want. You can slowly scale and outsource work, or you can stay small.
The Final Word on How to Become an Independent Contractor
Becoming an independent contractor is full of freedom and flexibility, but it’s not for everyone (and that’s okay!). You have to be self-motivated, understand the legalities of being self-employed, and ready to work harder than ever to build a successful business.
The flexibility you’ll experience as an independent contractor means you can get started on the side of your day job, while you’re in school, while raising your children, or even while you work on other side hustles.
Just remember, you’ve got to hustle to get where you want to be!
FAQs
All independent contractors are self-employed, but not all self-employed people are independent contractors. “Self-employed” is a classification, while being an independent contractor is a term that describes people who are hired by third parties to complete work on a contract basis.
If you want the flexibility and freedom to create your own schedule, offer the services you want, and the ability to grow your business the way you want, then it’s entirely worth it to become an independent contractor. And with so many low-cost business ideas, anyone can get started.
About Ariel Gardner
Ariel Gardner is the editor-in-chief of M$M, an elder millennial, and really wants to keep her lattes. She’s seen both ends of the financial spectrum, from trust funds to a paycheck to paycheck lifestyle, and uses that experience to empathize and connect with a wide range of readers. She has been editing and writing professionally for personal finance websites since 2015.
