Definition of 'Self-Employed'

Definition of 'Self-Employed'

  • Submitted By: kkm723
  • Date Submitted: 12/23/2013 6:25 AM
  • Category: Miscellaneous
  • Words: 342
  • Page: 2
  • Views: 85

Self-Employed

Definition of 'Self-Employed'

A situation in which an individual works for himself or herself instead of working for an employer that pays a salary or a wage. A self-employed individual earns their income through conducting profitable operations from a trade or business that they operate directly.

It is important to note that being self-employed is a different situation than simply being a business owner. A business owner is someone who owns a company but does not work with the day-to-day operation of the company. In contrast, a person who is self-employed owns their own business, of which they are also the primary or sole operator. Furthermore, there are often different taxation-related implications for being self-employed versus being a normal employee or a business owner.

Self-employment is the act of generating one's income directly from customers, clients or other organisations as opposed to being an employee of a business (or person).
Generally tax authorities will view a person as self-employed if the person (1) chooses to be recognized as such, or (2) is generating income such that the person is required to file a tax return under legislation that subsists in the relevant jurisdiction(s). In the real world the critical issue for the taxing authorities is not that the person is trading but is whether the person is profitable and hence potentially taxable. In other words the activity of trading is likely to be ignored if no profit is present. So, occasional and hobby- or enthusiast-based economic activity is generally ignored by authorities.
Self-employed people generally find their own work rather than being provided with work by an employer, earning income from a trade or business that they operate.
In some countries governments (the US and UK, for example) are placing more emphasis on clarifying whether an individual is self-employed or engaged in disguised employment, often described as the presence of a contractual...

Similar Essays