Starting a Side Hustle? Here’s How to Make it Legal

If you want to earn more money and know you are not going to get a raise anytime soon, you could be contemplating beginning a side hustle. And why not? Side hustles are perhaps easier to start today than ever before, and you have plenty of options to choose from.

You could become a delivery driver, start a dropshipping business, or make and sell your own products. Other ideas include teaching an online course, working as a content writer, and becoming an influencer.

Once you know what industry you want to work in, you will need to spend time researching your sector and coming up with a business plan. You also need to make sure that your side hustle is legal. Here are the ways to ensure you do that.

Separate Your Finances

First off, you need to ensure your side hustle business is legally separate from your own finances. If it is not, you risk your personal assets.

For example, if a client sues you, he or she could potentially take your savings and your possessions, including your house.

So, set up an appropriate business structure and open a business bank account. If you are unsure about how to do such things, seek advice from a professional financial advisor or a free business advice service.

Do Not Infringe Copyright

If your side hustle involves creating a product, selling creative works, creating a company name and logo, or anything else that could potentially be copied by a competitor, you need to ensure you have adequate legal protection via copyright and other intellectual property protection.

Just as important is ensuring you do not break any copyright laws by infringing on another’s intellectual property.

Know Your Tax Obligations

To run a side hustle legally, you need to report your taxes.

When you work for an employer, your taxes are automatically deducted. But when you run a side hustle business, you have to declare your side hustle income yourself. Do that by filling out IRS Form 10-99 MISC Income Statements with your tax return.

Also, be aware that if your side hustle starts bringing in significant income, you will need to begin paying quarterly taxes.

To make sure your side hustle business is following all legal rules, it is a good idea to seek the advice of a professional accountant.

Follow Industry Rules and Regulations

To ensure your side hustle is completely legal, you must follow industry rules and regulations; if the industry you work in is regulated.

You should know the laws for the city or state in which you operate, and keep up-to-date with those laws too.

Depending on your industry, you may need to provide public notices and disclaimers. For example, the U.S. Federal Trade Commission requires businesses to disclose whether they are being paid to promote products.

Read Your Contract of Employment Before Beginning Your Side Hustle

Lastly, employment contracts are increasingly stipulating that side hustles are forbidden, although that is more common in some industries than others.

If the contract for your main job states you cannot do other kinds of work and you go ahead with your side hustle anyway, you could not only lose your day job. You could also get sued. So, always read the terms and conditions of your contract.

In some instances, you may be allowed to work elsewhere but be limited in the type of work you do.

If you cannot start any side hustles because of your employment contract, the only way to make your side hustle legal is to leave your current job and find another. Or make your side hustle your main job.