You’ve got the idea (personalized pet key-chains), figured out your distribution channel (online web store: www.petsonkeys.com), and are now thinking: “Is there anything else I need to do with my side hustle?”
The answer: probably.
When building and launching a side hustle, there are a lot of things to consider. The fun ones are always the easiest to check off the list: business name, domain name, product and design. But what about things like incorporating, bank accounts and accounting?
In this article, we’ll take you through the less fun items of launching your side hustle. Don’t worry, we make it easy to understand both the how and why you might want to incorporate your side hustle early on. And we’ll provide you a bulletproof way to do it in less than 15 minutes (you can start that process here on Founded).
If you’re doing a side hustle, you’re not alone. In fact, you’re in the majority. A recent Linkedin study found that 71% of employees have a side hustle.
And the great thing about a side hustle is it can turn into your main gig sooner than you think. This is exactly why more and more entrepreneurs are setting up their side hustle right from the start.
There are a few things to consider when deciding whether to incorporate your side hustle.
If your side hustle involves a product, a service in a higher-risk industry, a project with multiple partners or if you’re already bringing in a lot of revenue, then incorporating may likely be your best course of action.
It’s only when your side gig is to provide a service with little to no liability where incorporating might not make as much sense to do early on.
Remember that even businesses which appear to have little to no liability can be exposed to risks. There are many instances where seemingly low risk businesses end up in scenarios where things don’t go as planned. Just take this case of a Kickstarter project where the entrepreneur wasn’t able to fulfill the orders. In these instances, if the business owner doesn’t incorporate beforehand, their personal property is at risk of being lost.
There are two primary reasons to incorporate your side hustle: to limit your liability and taxes.
The benefits of limiting your personal liability cannot be overstated. By incorporating, you will separate your personal and business assets.
For example, if you incorporate your pet keychain business: Pets On Keys Inc. and your business goes south, your personal assets will remain protected and untouched. If you do not incorporate and operate your business as a sole proprietorship or a partnership, you will remain personally responsible for the debts of the business – which can put your personal property (like your home, car, and computers) all at risk.
Also, by incorporating your side hustle, you’ll be able to take advantage of lower corporate tax rates. Because of this, you’ll have more money in the corporation to grow your business. Tax questions can get confusing, so if the sole reason you want to incorporate is for reduced taxes, you’ll want to speak with an accountant to learn how incorporating could benefit your side hustle.
Finally, incorporating makes it all official. You’ll be signaling to the world that you’re treating your business seriously from the start. After incorporating, you’ll send invoices through your corporation rather than your personal name. So go ahead, register that business name and make it official!
Incorporating is now easier than ever. You’ll be able to reserve your perfect business name, add any partners to your corporation, and ensure all the legal paperwork is done properly right from the start… all in under 15 minutes. To start, click here to make use of Founded’s business name search tool and create your free account to start building your corporation.
After you incorporate, you’ll be able to fly through the other less fun items, like opening your bank account and registering for your GST/HST number. Then, you’re off to the races and ready to grow that side hustle!
Founded is a leading legal automation platform used by 1000+ businesses, law firms and large enterprises. Founded automates legal work, including incorporations, legal documents and ongoing compliance, providing a fast, intuitive and collaborative experience. You can follow Founded on Twitter.