Defining you: contractor, freelancer, micro business, small business…

Posted on Sep 10th, 2010 | Becoming self-employed

Crunch is an online accountancy service which serves the small business community. Our customers span a range of different self-employed types. Some are contractors, others are freelancers and some define themselves as micro-businesses.

But what’s the difference? Time to jargon bust.

The shrewd small business

This is largely a blanket term which can be used to refer to micro-businesses, freelancers and contractors.

Sections 382 and 465 of the Companies Act 2006 define a small company as one which has a turnover of not more than £6.5 million (with a balance sheet total of not more than £3.26 million) and no more than 50 employees.

The masterly micro-business

The term micro-business is often used informally to describe a business which is a bit smaller than you average small business. It’s often used to refer to companies making less than £2 million per year employing less than 10 people.

The canny contractor

The term ‘contractor’ is often used interchangeably with ‘freelancer,’ but there are key differences. As the excerpt above highlights, contractors usually work on site at a clients office whilst freelancers often work wherever whenever.

The industry can also effect your status. Those who work via their own company in the IT field are usually known as contractors. But things can get confusing: when an IT contractor becomes a consultant, they are sometimes referred to as ‘freelance consultants.’

Last, but not least obvious, is the fact that contractors usually work via contracts!!

The thinking freelancer

Freelancers work flexibly often without a contract. They may work on site or work from home. Once again the industry can offer a clue, so if someone is self-employed as a writer you can be sure that they’re a freelancer.

In summary

A freelancer or contractor can also be defined as both a micro-business and a small business. Annoyingly, this definition can vary depending on who you’re talking to; for example, energy companies and banks may have their own interpretations for what constitutes a small business. This is why such terminology is used rather loosely.

But regardless of which one of these you may be, Crunch’s online accounting service is perfectly suited to your needs!!

Useful tools and resources

Business guides

From understanding expenses to starting a limited company, we've a range of jargon-free business guides for you to download and keep.

Invoicing software and templates

Create, send and store sole trader invoices in a snap with our free invoice software. You can also download a selection of invoice templates for all business types.

Take-home pay calculator

Use our Take-Home Pay Calculator to work out your true earnings and see if you could save money with a different company set up.