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Last Updated: 5/1/2017

Are you self-employed?

Generally, you are self-employed if any of the following apply to you:

 
  • You carry on a trade or business as a sole proprietor
    A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. 
  • You carry on a trade or business as an independent contractor
    An individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.
  • You are a member of a partnership that carries on a trade or business
    A partnership is the relationship existing between two or more persons (and/or business entities) who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business. A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
  • You are otherwise in business for yourself (including a part-time business)
    You do not have to carry on regular full-time business activities to be self-employed. Having a part-time business in addition to your regular job or business also may be self-employment. 

Trade or business

A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. The facts and circumstances of each case determine whether or not an activity is a trade or business. Important elements include:
 
  • regularity of activities
  • regularity of transactions
  • production of income

You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. However, you must make ongoing efforts to further the interests of your business.