There’s a chance you’re a budding entrepreneur who has a side project but doesn’t see yourself that way quite yet.
According to a survey conducted by Bankrate and published in 2017, 44% of U.S. adults report having a second job or business.
The term “side hustle,” which also refers to “side gig” or “side project,” is shorthand for working on the side. Those that have a side gig usually go out of their way to find it. One can earn extra money through side jobs such as driving for a ridesharing service or writing on a contract basis.
Freelance employees can earn some extra cash each month, which can be put toward bills or saved for the future.
The benefits of a side hustle go far beyond financial.
However, financial gain isn’t the only motivation for many people to join the gig economy.
Numerous studies have found that people’s interests and passions are highly congruent with their side projects.
Sometimes a budding chef would publish their own recipes online for others to try. It’s possible for a writer to freelance for multiple online and offline media. Some yoga teachers also work part-time at yoga studios, where they instruct students.
The more time and effort these individuals put into improving and expanding their side businesses, the more likely it is that they will be able to make it their primary source of income.
Advertisements for the wannabe chef’s cooking blog could be provided by a company in the food industry. The freelance writer’s web portfolio will expand as they gain bylines from more and more publications. Maybe the yoga teacher wants to branch out and create their own studio.
Making a living off of your interests
The words of the Greek philosopher Aristotle, “We are what we continually do,” have become a household phrase. Then, superior performance is not an isolated deed, but rather the result of a consistent effort.
Those that dedicate more time to their side ventures do so in order to develop their skills and expand their online presence. This will put them in a better position to pursue the next step, which is to develop the hobby into a full-time enterprise.
Here are three indications that your side gig is ready to go full-time.
When does a hobby become a business, and how do you know? The time has come to take that side project you’ve been working on to the next level and turn it into a full-fledged business.
Every year, you bring in more than $400 in income.
You’re starting to feel more committed to the side gig.
You’re seriously considering making your side project your full-time gig.
Having established whether or not your side gig has the potential to become a startup, we will then discuss the steps company owners must take to transform their side gig into a full-fledged enterprise.
If (1) your annual take-home pay is more than $400, and (2) you have no significant debt,
As a Side Job, I Do Taxes
The IRS mandates tax filing for those who have earned more than $400 in self-employment income using Form 1040. Self-employment income of less than $400 per year is the only exception to the requirement to file tax returns.
Entrepreneurs may feel they need a lot more money before they can turn their hobby into a legitimate enterprise.
The Internal Revenue Service, however, views $400 in annual earnings from hobbies as the point at which one becomes self-employed.
Even while your side gig’s annual earnings of $400 might not be enough to warrant treating it as its own firm just yet, you still need to disclose it as such on your tax returns. If you don’t, you can have to pay tax fines before your side project is even ready to become a business.
The passion for the side project you’ve been working on is building.
This symptom typically manifests itself over time. While working your day job, you may find yourself thinking about the following potential challenges and opportunities for your side endeavour.
Achieving a positive rate of return (ROI) and sustained expansion
Just how do you see your side project and its clientele expanding as time goes on? Will money be set aside for promotional efforts? Where are your money’s present priorities? Have these investments yielded a positive or negative return on investment?
Do you now require outside assistance with your burgeoning side project? Have you started contemplating delegating tasks to others who possess complimentary skills?
Bringing the hobby to the office
Do you spend the day fielding client emails or working on side projects while you’re not actively working with clients? You might be bringing your side project to the office and progressively devoting more time to it than to the tasks at hand at your day job.
A side project is no longer regarded a pastime once it begins generating income and continues to do so for at least three out of every five years.
It’s acceptable to put effort into your side project, but make sure you don’t let your regular duties slide.
Your part-time endeavor has been so successful that you’re considering leaving your day job to focus on it full-time.
Your successful side project may tempt you to quit your day job and devote yourself full-time to it. It’s a thrilling sensation, but quitting for good calls for serious consideration of the consequences.
You should not start your two weeks until you have completely answered these questions.
When it comes to money, are you ready?
Staying put where your finances are secure is recommended if you are currently making loan payments or have debt to pay off. Get out from under your debt load as soon as you can. The next step is to start saving for both your emergency fund and your business.
Make a spreadsheet detailing your current monthly outlays to determine how much money you need to bring in each month to keep the business and yourself afloat.
Your transition into self-employment may be delayed if you take this course of action. A safety net, improved credit standing, and less worry about running out of money and having to dissolve the business are all benefits of this strategy.
The question is how you intend to maintain your insurance coverage.
Health insurance, 401(k) plans, and disability insurance are just some of the perks that come with working a full-time job. You’ll have to figure out how to continue paying for health insurance and other mandatory benefits on your own once you quit your employment.
Have you ever tried being an entrepreneur?
Get together with a role model who has succeeded in a field related to your own aspirations. Likely, they will be forthright about the time and effort required in the role, as well as the number of hours you’ll actually have to work (hint: it’s more than 40 a week).
We accept the fact that not everyone is cut out for business ownership.
Do it if you’re confident in your abilities. However, if you don’t feel quite ready to turn your side project into a full-fledged firm, you might choose to keep it in the “side project” category for the time being.
All three of these indicators should lead you to conclude that it is time to start turning your hobby into a small business.
While becoming an entrepreneur is not without its risks, you can lessen those risks by completing the following legal tasks.
(1) Create a business plan.
Incomplete Business Plan Doodling for a Side Project
Use this plan as a guide as you build your company. Keep in mind that simply having one written does not guarantee your company’s immediate success.
A business plan helps founders agree on a shared vision for the company and critically assess its viability.
Entrepreneurs may prepare a business plan in a classic or lean structure. Let’s simply sum up what should be included in each version.
Plan of action in business, traditionally
Traditional business plans are usually between 30 and 40 pages long and contain a lot of information. The following are components of these strategies:
A brief synopsis of yourself and your company
Functions of the New Venture
The spot where
How it generates revenue
Reasons why people should spend money on your products or services
After this comes a description of the company and its offerings (including specifics), a look at the market and its potential customers, and an introduction to the startup’s leadership. The cash flow of the firm and the investor funding requests are also covered in detail.
Plan for a Lean Startup
The plans for a lean startup are substantially less complicated. They are typically one page or less in length.
The value proposition of a side project, as well as its important partnerships, resources, and activities, can be found in a lean startup strategy.
Also included are descriptions of target audiences, channels of communication with those target audiences, and revenue sources for the side gig.
2) Establish a corporation or limited liability company
Incorporating or organizing an LLC early on is highly advantageous for your hobby-turned-small-business pursuits.
With incorporation, you can enjoy the benefits of limited liability (a feature shared by all legal businesses), significant tax savings, and enhanced credibility in the eyes of your customers.
After all, who wouldn’t want to do business with a firm that proudly displays “Inc.” or “LLC” in its name?
Do you feel confused about choosing the “best” organization? Here are some common organizational forms to take into consideration.
Businesses in which one person acts as the boss
Creating a company in this way gives entrepreneurs full authority over their once-hobby business. They are the ones who decide what happens. Forming a sole proprietorship can be done for a little cost and with minimal red tape.
But unlike most other business structures, sole proprietorships don’t shield their owners from personal responsibility in the event of a lawsuit. The founder’s personal assets may be at risk along with the company’s in the case of an accident that destroys the business.
Company with limited liability (LLC)
A limited liability company (LLC) shields its members from personal responsibility for corporate debts and obligations. That way, your business and personal finances are kept entirely separate.
LLCs provide liability protection, but they also provide many other advantages. And you can even select whether you want to be taxed as a S Corporation or a C Corporation when forming an LLC.
It’s possible that your side project has the potential to go public or perhaps international. In that case, you’ll be happy you went through the trouble of forming a corporation. A corporation is very similar to an LLC in that it shields its shareholders from personal responsibility in the event of any wrongdoing.
The entity is much less adaptable than a limited liability company. The organization’s formal framework enables it to take funding from investors.
Partnership\sSide Project Partners Shaking Hands
Two or more individuals may start a business together if they incorporate as a partnership. Remember that if you choose a partnership as your entity, make sure you’re going into business with a partner you know can make decisions with and work together for the greater good of the startup.
Editor’s note: Make sure your brand is ready to go bigger by securing a strong domain name and attaching it to a professional website and email address.
Register the side project’s trademarks
Does your side project have a unique name, design, tagline or logo associated with it? This is your side project’s trademark.
It’s a valuable piece of intellectual property for your budding business.
The mark helps differentiate your company from competing businesses on the market and allows you to begin building brand recognition.
If you have a unique mark, it’s important that you file a trademark application as soon as possible.
The general rule of thumb is to register a trademark after incorporating or forming an LLC for your side project. Once your trademark has been registered, no other business can take or copycat the mark from you and pass it off as their own creation.
Ready to register a trademark?
Conduct a name search first through the USPTO trademark database to see if the mark is available. If there are no pending or registered applications for the mark, you are free to file a trademark application.
Remember to pay the associated fee required with your application. You are also welcome to consult an attorney with any other questions you may have about trademarks or the filing process.
While you’re waiting for your trademark’s registration, you can monitor your application through the USPTO’s Trademark Status and Document Retrieval (TSDR) system. Here, you can conduct a “trademark watch” to ensure other pending applications with similar marks are not registered.
Busy entrepreneurs with a lot on their side hustle’s plate may also work alongside a third party. Online filing service companies provide trademark watch services. They work to keep an eye on the status of your trademark. This gives entrepreneurs peace of mind and allows them to focus on what they do best: turning their side project into a booming standalone business of its own.
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