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Should I Be a Freelance Consultant or Start a Consulting Business?

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    Are you ready to take your skills out on your own, but unsure if you should be a freelance consultant or start your own consulting business? Understanding the differences between these two paths will help establish your direction for moving forward to ensure you’re choosing the right one for you.

    Freelance Consultant

    Many seek out a freelance role for the increased flexibility of work hours, the ability to choose the work you’d like to do and the low startup costs (you don’t need a big budget to start working as a freelance consultant). But what else is there that goes into being a freelance consultant?

    1. Know what you’re good at: You need to be able to market yourself and show that your skills are unique and important enough that a business would benefit from contracting you as a consultant for their organization.
    2. Pick your niche: Market saturation is real and can hinder your success. Where is there high demand right now and a space where no one is fulfilling the need?
    3. Set your pricing: This is often one of the most challenging aspects of freelancing. You don’t want to sell yourself short, but you don’t want to price yourself out of the market either. When establishing your pricing structure, don’t forget to think about how this will unfold long-term when you become more established.
    4. Network: Since you’re on your own, building up your network is an important part of getting new business. Look for local and online meetups and mastermind groups to start making connections.
    5. Create your website: Your online presence needs to reflect you as a freelance consultant. Your website will be the most important tool to showcase you to potential clients, and it's absolutely necessary to your success.
    6. Understand your taxes: The self-employment tax rate is 15 percent, and as a freelancer you will need to set aside money to pay estimated taxes four times a year. This tax is unique to freelancers and other self-employed individuals, so ensure you manage your finances well.
    7. Consider setting up an LLC: Even as a freelancer, working under an LLC can help you avoid some extra self-employment tax if you manage your deductions property. Forming an LLC will also protect your personal assets and limit your personal liability.

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    Consulting Business

    Starting your own consulting business is a larger undertaking and requires more planning and financial support than becoming a freelance consultant. While there are similarities to freelancing, such as assessing your strengths and market needs, there are also clear differences when it comes to owning a business or being on your own.

    1. Plan your finances: Starting a small business doesn’t necessarily require a lot of money, but it will have an upfront investment — and you'll need the ability to cover ongoing expenses before you start turning a profit. Some initial expenses include license and permits, equipment, legal fees, insurance, marketing, etc.
    2. Hire staff: How many employees you need really depends on the amount of work you have to do as a business owner. If you are looking to be in a more consultant role yourself, you will need to consider hiring an accountant or other administrative staff to help with additional responsibilities.
    3. Invest in industry tools: Consider purchasing software tools to help you with recruitment, conferencing and project management. These tools are necessary to help your business operate more efficiently and connect employees to clients.
    4. Form a business entity: Consider whether you'd benefit more from being an LLC or S Corp. The business entity you choose will impact your liability and how you file your taxes.
    5. Set up a business location (if applicable): Many businesses can run virtually, but if you’re looking for a physical location to operate your business, you will need to think about your location, equipment and overall setup.
    6. Promote your business: Promoting your business will help attract new clients and customers, but it will also attract talent to work for you. Similar to freelancing, your website will be the first stop for many prospects to understand what your business is all about. Be sure it includes relevant information and an easy way to get in touch with you.

    Whether you become a freelance consultant or start your own consulting business will really depend on the type of structure you’re looking for. If more flexibility is for you, freelancing may be a better choice. If you’re looking to create a larger consulting initiative, starting your own business may be the route to go.


    No matter which option you choose, forming a business entity will help keep your personal assets protected as you build credibility for your company. You can form with Bizee today for $0 + plus fees (and you'll get a free year of our Registered Agent service), or check out our other resources for managing your company.


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