Employees are not liable for the debts incurred by their employers. An employee will lose his or her job when the employer's business fails, but will owe nothing to the employer's creditors. An IC whose business fails could lose everything he or she owns. The self-employed are ordinarily classified as independent contractors for tax, workers' compensation, unemployment and other purposes. Whether you qualify as an employee or independent contractor is important both to you and the firms that hire you because an employer-employee relationship is very different from the relationship between a hiring firm and an independent contractor.
Employees have a special legal status.
Employers owe duties and responsibilities toward employees that do not exist when they hire independent contractors. Moreover, the tax treatment of employees is very different from that of independent contractors. Initially, it's up to you and each hiring firm you deal with to decide whether you should be classified as an independent contractor or employee. But the decision about how you should be classified is subject to review by various government agencies, including the IRS and state workers' compensation and unemployment compensation agencies. These agencies are constantly on the lookout for hiring firms that, in their view, misclassify employees as independent contractors.