Steve Alverson, CFP®
Financial Advisor
5 Steps For People With Side Hustles
Financial Advice for Business Owners
You have a few side projects that are starting to produce some revenue. Once that side hustle or project starts making a little bit of money, you might consider the following before growing the business.
1. Form a business or entity to operate the side hustle
If the side hustle involves people, you have liability. A business entity can help shield you from that liability.
They also have expenses that can be written off if documented properly, thus saving you on taxes.
2. Get an accountant
A GOOD one. Not the pop-up shop type that works 3 months a year. I know of several, call me, and I can refer.
3. Figure out which entity to form
I like LLC's but ask your accountant or attorney what might be a best fit and how to start it. You can also Google your state's "Secretary of State how to start an LLC."
Also, different side hustles might need their own LLC. You wouldn't want a food prep business operating within a concrete business.
“You wouldn’t want a food prep business operating within a concrete business.”
4. Insurance
Get insurance and boost your personal umbrella policy. It’s cheap.
5. Open a checking account for the llc
Deposit working capital and start tracking all expenses. Reconcile every month or have your accountant do it. With your accountant's blessing, use this for items such as mileage reimbursement, cellphone bills, internet, electric, and healthcare. This will help minimize tax burden.
Also, and I see this often. Don't spend just to save money on taxes... that's a lot of work to not have any profits.
Call me when you have more profits than you know what to do with. :)
This material is being provided for information purposes. Any opinions of those are of Steve Alverson, CFP® and not necessarily those of Raymond James.