The Differences Between Entrepreneurship and Self-Employment
Entrepreneurship and self-employment easily can be confused, but there are distinct differences in the definitions of these terms. Self-employed individuals perform services on a contract basis for a range of clients. Entrepreneurs organize productive assets to create and maintain a business. The definitions of self-employment and entrepreneurship overlap at times, but there are a number of instances in which self-employed individuals are not technically entrepreneurs. Both terms generally refer to the act of taking your financial situation into your own hands, rather than relying on an employer for income.
A self-employed individual can work in a variety of environments, including a home office, libraries, coffee shops and other WiFi-equipped public spaces. Entrepreneurs can work in any of these environments, as well, but they often work in offices owned or rented by the companies they own, sharing work spaces with employees who work for them. A self-employed individual is more likely to work from spaces that do not incur additional expenses, because all self-employment-related expenses technically can be considered personal expenses. Entrepreneurs oftentimes have no choice but to obtain their own offices as their companies grow and take on more employees.
Self-employed individuals receive payment directly from their clients, generally via cash, check or electronic payment service. Self-employed contractors send invoices to clients for work performed, and clients treat the payments as operating expenses outside of the salaries/wages category. Entrepreneurs are compensated by taking a share of the profits from their businesses. Business profit derives from revenue obtained from numerous customers or clients. The major difference is the fact that entrepreneurs' clients pay the entrepreneurs' businesses, while self-employed contractors' clients pay the contractors directly.
Self-employment carries far fewer requirements and restrictions than entrepreneurship. Contractors often deal with government agencies only when it is time to file their personal income taxes. Entrepreneurs must deal with a wide range of legal requirements, including business registration and licensure, obtaining local permits, meeting legal insurance requirements and filing business taxes.
The issue of employees is an area where self-employment and entrepreneurship can overlap. A self-employed individual cannot have employees working for him, although he can pay subcontractors to help him serve clients. An entrepreneur can have any number of employees working for his company, but it is possible for an entrepreneur to operate a one-man company. The difference between a self-employed individual and an entrepreneur running a one-man company comes down to business registration and the ways in which the individual serves and bills clients.