No employer-provided benefits.

Many employers provide their employees with health insurance, paid vacations, and paid sick leave. More generous employers may also provide retirement benefits, bonuses, and even employee profit sharing.

When you're an IC, you get no such benefits. You must pay for your own health insurance, often at higher rates than employers have to pay. Time lost due to vacations and illness comes directly out of your bottom line. And you must fund your own retirement. If you don't earn enough money as an IC to purchase these items yourself, you will have to do without.

No unemployment insurance benefits.

ICs also don't have the safety net provided by unemployment insurance. Hiring firms do not pay unemployment compensation taxes for ICs, and ICs can't collect unemployment when their work for a client ends.

No employer-provided workers' compensation.

Hiring firms do not provide workers' compensation coverage for ICs. If a work-related injury is an IC's fault, he or she has no recourse against the hiring firm.

Few or no labor law protections.

A wide array of federal and state laws protect employees from unfair exploitation and discrimination by employers. Very few of these laws apply to ICs.

Risk of not being paid.

Some ICs have great difficulty getting their clients to pay on time or at all. When you're an IC, you bear the risk of loss from deadbeat clients. For information that will help you collect what you're owed, see Getting Clients to Pay Up.

Liability for business debts.

Finally, most ICs are personally liable for the debts of their businesses. An IC whose business fails could lose most of what he or she owns.

To learn more about the ins and outs of working for yourself, get Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants, by attorney Stephen Fishman (Nolo).