The I.R.S., that's the U.S. government's tax authority says that a freelancer 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 or how it will be done. In other words, the client could say, render my building and deliver the results as a Layered Photoshop File, and you'd still be considered a freelancer. But if the client says, "You must use 3D Studio MAX and do the work in our office between 9 AM and noon," then the I.R.S. is likely to consider you an employee rather than an independent contractor which would lead to differences in such things as tax withholding, benefits and so on. Such distinctions vary from country to country. In the U.S., the I.R.S. released some specifics that set forth 20 factors to separate employees from independent contractors. But on a day-to-day level, you'll be more affected by the practical differences. The big one is, if something needs doing, you're the one to do it, and there's nobody else to blame if it doesn't get done. You're now in charge of among other things, marketing, sales, accounting, project management, IT, and legal matters. You also have to keep yourself busy, and motivated. And if you expand by hiring other people, you have to become your own human resources department. If you think that's all daunting, well, you're right. Finally, we come to the personal differences between freelancing and employment. That is, how your mentality and lifestyle will change. For example, you're likely to find your work life creeping into your personal life and vice-versa. So it becomes much harder to judge whether you're being productive. And that can lead to some unexpected anxieties.