Hello Side Hustler!
You’ve thought about it for years and you have finally made the decision to commit to your dreams and start your side hustle! One of the unsexy parts of making extra income is deciding on a business structure for your side hustle.
Three things to keep in mind:
Cool? Cool - now that that’s out of the way, in the United States there many types of business but we are going to cover just the 3 main ones most people consider (again see #3 above):
Sole Proprietorship - how most side hustlers start out
+ you do not need to file paperwork in most jurisdictions
+ start today
- business income and liabilities are not separate from your personal assets
- you are personally responsible for civil suits
Corporation - most people avoid this
+ corporation is held legally liable - not you
- Can result in double taxation: income is taxed at the company level and then when it’s disbursed to you
- a lot more record keeping required
Limited Liability Company (LLC) - the choice of most side hustlers
+ you are not liable for lawsuits - your assets are protected
+ pass through taxation, only pay taxes once!
- requires annual reports
- corporate registration information is public
You also are going to need to look into state and county licenses. (Resource)
In the spirit of “do it once, do it right”, we recommend an LLC for nearly everyone. You can learn more about the different types of businesses and get a checklist of what to do in our Startup Guides!
But again for those in the back, to be on the safe side consult a lawyer, and we are NOT lawyers.