The side hustle is real. A quick scroll through Facebook and you’ll run across people selling all types of products and services straight from the comfort of their living room or while sitting at the desk of their “real job”. More and more people are looking for ways to make a little extra cash and with social media at our fingertips, it’s getting easier to do so. If you have a side hustle or thinking about starting one, consider these tips to stay on the right side of the law.
Creating an LLC (limited liability company) for your side gig is almost always a good idea. If something goes wrong with the products or services you’re providing, it could expose not only your business, but also your personal assets to liability. Setting up an LLC can protect you from the latter.
The last thing you want is something going wrong with your side business that could affect your personal bank account. Let’s be honest, no matter what you are selling, the more you sell of it, the more likely something will go wrong. If that unhappy customer decides to take legal action, having an LLC in place helps limit your liability to only the assets of the business and protect your personal ones.
If you have a job and you’re thinking about picking up a side gig to supplement your income, take a look at your employment contract first. Sometimes employers will prohibit employees from selling products or services outside the scope of your employment. This could limit what your side gig looks like, or worse yet, you could have to share those proceeds with your employer.
Or, maybe you’re thinking about leaving your full-time job to do your own thing? Before you put in your 2-weeks’ notice, review your employment contract. Often times, employers will include non-compete provisions which could prohibit you from going out on your own, especially if your new business will compete with your prior employer.
Another thing to keep in mind is that your employment contract could give the employer the right to any product or idea that is developed by their employees while on the job, so it’s generally not a good idea to use company resources to work on your side gig or starting that new business.
Finally, don’t forget that your side gig needs to be reported for tax purposes. You’re probably not going to get a W-2 or 1099 that provides all of the relevant amounts for you, and depending on the volume of sales you have, you may be subject to collecting and paying sales taxes in addition to income taxes. So make sure you’re keeping proper financial records.
Navigating the legal puzzle of your side hustle can be confusing, but following these tips will increase the chance of getting that extra cash in your pocket, and keeping it there!
Karlee Canaday joined Martin Pringle in 2019 after clerking with the firm for two years. Karlee completed her undergraduate degree at Kansas State University and went on to earn her J. D. at the University of Kansas School of Law. She focuses her practice on business & entrepreneurial law, tax law as well as estate planning including estate administration and probate.
Danielle Cornejo earned an undergraduate degree in Strategic Communications at Oklahoma State University. She knew she wanted to further her education, and after a bit of soul searching, Danielle decided to apply to law school. When Danielle’s father passed away during her first year at the University of Oklahoma School of Law, she was elected by her family to administer the estate. Left with no will or trust to guide her, Danielle relied on law school professors and mentors to help her through the emotional task of administering her father’s estate. This experience confirmed for Danielle that attending law school was the right decision. Although she encourages clients to seek her assistance in making a testamentary plan, Danielle also stands ready to help those who find themselves in situations similar to hers, when a loved one dies intestate. Danielle focuses her practice on estate planning, estate administration, tax law, business law, and real estate matters.