write a note on self employment
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Self-employment refers to working for oneself rather than working for a specific employer who pays them a salary. Self-employed individuals often act as independent contractors by collaborating with other businesses.Types of Self-Employment
The three types of self-employed individuals include:
1. Independent contractors
Independent contractors are individuals hired to perform specific jobs for clients, meaning that they are only paid for their jobs. Since they are not considered employees, they are not subject to workers’ compensation. Their clients, unlike traditional employers, do not need to withhold taxes from their payments for completed work.
Some examples of independent contractors include doctors, lawyers, journalists, accountants, and blue-collar occupations, such as plumbers, electricians, and handymen.
2. Sole proprietors
Sole proprietorships refer to a type of enterprise that is owned and operated by a single individual. However, it does not mean that a sole proprietor works individually; often, they may choose to hire a few employees to help them.
It should be noted that there is no legal distinction between the owner and the business entity in sole proprietorships, meaning that while the sole proprietor receives all the profits from the business, they face unlimited responsibility for all losses.
3. Partnerships
Partnerships are an arrangement between two or more individuals to manage and operate a business together and share in its profits and losses. It is somewhat similar to sole proprietorships, except that there is now more than one person with operational control.
There are different types of partnerships, ranging from general partnerships that enable all members to share profits and liabilities equally to other forms of partnerships where some partners might face limited liability. Sometimes, partners can also be “silent partners,” which means that a partner is not involved in the day-to-day operations of the business but contributes capital to the business instead.
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