Is Your Side Hustle Taking Off? Do These 6 Things Immediately to Protect Your New Business
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Let’s talk about the side hustle.
Some people have a side hustle in which they are employed by someone else part-time or in a sales/commission-based role. Others find themselves running a low key company.
Today, we’re tapping into the latter, in which I have found myself doing just that. As I ramp up to get my gym open and off the ground, I somehow also became a graphic and web designer. Now, I wouldn’t say that I am the best of the best, but I am proud of the work I can do.
It’s come to a point where I actually have clients and this side hustle is feeling a bit more legitimate than I thought.
So, what do you do if you find yourself low-key running a new company? In order to make things as simple but legitimate as possible, just make sure you check these things off the list to protect yourself down the line. After that, then go ahead, open a bottle of champagne and celebrate your accidental new company.
1. Officially register yourself.
Since you will be accepting money for your services, you’re now in legal territory. If it’s a simple business where you’re making goods on Etsy or offering design services (where there’s less risk that you’d get sued), a sole proprietorship is a popular choice.
If you have more risk or complex structure involved, then look into a corporation, partnership, or LLC, but make sure you understand the liability and tax implications before making a decision.
2. Get a Doing Business As (DBA).
If you’ve opted for a sole proprietorship but don’t want to call your company your actual name, then register for a “Doing Business As” name with the county. This way, you are protected as yourself, but you can run the company under a much catchier name.
3. Protect yourself with contracts or written policies.
Depending on what your business is, be sure to formulate contracts, waivers, and/or policies ahead of time.
For example, I have written and official contracts that all my clients need to sign before beginning design work that also includes a down payment, just so that both parties have something to refer to if there is a disagreement. Even if you’re just doing work for friends, save yourself any loopholes and make things official.
4. Understand your tax obligations.
This is where things get tricky and depend mostly on how you’ve decided to run your business. Make sure you do thorough reading on this and consult a tax professional first, but here are your quick need-to-knows.
Know when you have to start paying taxes.
The government requires you to pay taxes on self-employed work when your profits exceed $400. If you make under $400, you may still have to report your earnings if you qualify for other listed filing requirements.
Being self-employed means a different tax schedule.
Now that you are self-employed, you have to pay for quarterly taxes. The IRS identifies self-employed as being a sole proprietor, independent contractor, member of a partnership, or in business for yourself, even as part-time. This is crucial – I’ve missed these quarterly tax deadlines before and got a small, but unnecessary penalty for it.
Research your deductions.
Yes, you may have to start paying for taxes on some things, but you may also be able to deduct other business necessities like a home office. Start saving and categorizing those receipts.
5. Register for an Employer Identification Number (EIN).
This one is really easy to do but it helps the IRS identify your business. Simply visit the IRS website and follow the step-by-step instructions. This is the cherry on top of officially making your side hustle a little more than just a side gig.
6. Go on, do your thing.
These are the top things you should look into do as you find yourself starting to get more serious about your side gig. It may seem like a lot, but if you dedicate a few hours to researching and completing the paperwork, you’ll be good to go.
And my favorite pro-tip? Start setting calendar reminders for things like quarterly tax due dates as you run into them so you never forget (trust me, the penalty is worth a week of solid lunches).