So, you’ve started a side-hustle—congratulations! Whether you’re slinging handmade jewelry, freelancing as a graphic designer, or turning your baking hobby into a profitable cookie empire, keeping things on the straight and narrow is key. Let’s be honest, navigating the legalities of a side-hustle can be about as thrilling as watching paint dry. But don’t worry because here are some tips to help you keep your side gig squeaky clean and as far away from any legal grey areas as possible.
- Get to Know Your Local Laws
First thing’s first: hit the books (or, let’s be real, the internet). Your local city or county website is a treasure trove of information on what you can and, more importantly, cannot do from your home business. Some areas have restrictions on the type of business activities allowed in residential areas, so it’s better to know before your home kitchen turns into a full-scale bakery.
- Separate Your Dough
And by dough, we mean money. Keeping your personal and business finances separate is the cardinal rule of side-hustle financial management. Open a business bank account. This not only makes your life easier come tax season, but it also helps you look like a bona fide business in the eyes of the IRS—and that’s always a good thing.
- Speaking of Taxes
Ah, taxes—the word alone can send a shiver down the spine of any spirited entrepreneur. As a side-hustler, you’re responsible for reporting your income, and yes, that includes even the smallest earnings. Familiarize yourself with self-employment tax and consider using a simple accounting software to keep track of everything. The IRS isn’t known for its sense of humor, so it’s best to keep things tidy.
- Get Your IRS EIN Number
Planning to expand or just want to keep things super professional? You might need an Employer Identification Number (EIN) from the IRS. It’s like a Social Security number for your business, which you’ll need if you plan to hire employees or if you prefer not to use your Social Security number for business transactions. You can apply for an EIN online, and there are plenty of IRS EIN number application help services that can help guide you through the process if navigating government websites isn’t your idea of a good time.
- License to Thrill
Depending on what your side-hustle entails, you might need a specific license or permit. This could range from a food handler’s license for selling those scrumptious pastries to a professional license if you’re diving into something like freelance accounting. Check with your local government to see what you need—it’s better to be over-prepared than under.
- Protect Yourself
Consider getting insurance. Yes, even side-hustles can benefit from a good insurance policy, especially if your business involves a lot of personal interactions or expensive equipment. Insurance might seem like an unnecessary expense, but it’s a small price to pay for peace of mind.
- Keep It Real (and Documented)
Last but not least, document everything. From sales receipts to expense reports, keeping a detailed record can save you a lot of headaches. It’s not just about being organized; it’s about protecting yourself and your business. When in doubt, write it out.
Running a side-hustle can be incredibly rewarding, and a great way to make money, but it can also land you in heaps of trouble if you fail to keep it legal, so be sure to dot those I’s and cross those T’s!