These days, everyone and their brother seems to have a side hustle.
(In case you’re still in the dark, a side hustle is a product or service you sell on the side without quitting your day job.)
So what’s stopping you?
Sure, you’ve got an idea for your side hustle—and maybe even a few clients lined up—but now what? Don’t lose momentum by getting stuck on the details!
We’ve outlined 6 simple actions that will take your business from “back of napkin” idea to reality. From registering your business name to processing that first client payment, here’s everything you need to do to get your side hustle up and running:
First up: paperwork. This part sounds like it will be complicated but actually isn’t.
Let’s break it down.
First you need to decide whether you’ll do business as a sole proprietor or a limited liability company (LLC). (There are a few other structures, like S Corporations, but we won’t go into them here as most businesses don’t need to worry about that until they get much bigger.)
What’s the difference between an LLC and a sole proprietor? Well, you don’t need to do a single thing to be classified as a sole proprietor—you already are, just by setting up shop! As a sole proprietor, you cash checks and pay taxes under your own name. You don’t need to file any special paperwork*, unless you plan to do business under a different name, in which case you’d register your DBA (see the next step).
But as a sole proprietor, you’re also on the hook for your business’s assets and obligations—so if you fail to repay a loan or get into a legal dispute, your personal property can be seized.
*Here’s where the “but” comes in. Although you can start doing business right away as a sole proprietor without doing any special paperwork, in order to collect payments with a merchant account, such as the one provided by PaySimple, you do need to register your business as a sole proprietorship. Luckily, that’s super easy to do. The process varies by state so visit your local chamber of commerce website and check out the business filings sections. In most cases, you can become a registered business in less than 48 hours.
If liability is a concern or you’ll be dealing with large sums of money or expensive equipment, an LLC, or “limited liability company” structure, might be right for you. It gives you an added layer of protection. As an LLC, the only things vulnerable to a potential dispute or lawsuit would be your business assets, not your personal assets. (However, you’d still report your profits or losses on your personal federal tax returns, just as you would with a sole proprietorship.)
The rules for setting up an LLC vary by state, but in general you’ll need to:
Still not sure whether an LLC or sole proprietorship is the right choice? Don’t worry: just choose one, and you can always switch later.
There are two main reasons you’d want to register a DBA, or “doing business as” name:
Most states require that you register a DBA, although there are exceptions, so be sure to check. Here’s what you should do next:
Even if you don’t have employees, you’ll need an EIN (employee identification number) to open up your business banking account. An EIN also gives you an added layer of security: for example, if you’re working with clients who request a W-9 form from you, it’s helpful to use your EIN rather than giving out your social security number. You never know if those forms will be handled securely or not.
An EIN is simple to apply for and is generated on the spot. Spend a couple minutes filling in this IRS form, and you’ll be set!
Now we’re getting to the fun part, because you’ll need someplace to stash all that extra side hustle cash! Your next stop is the bank, where you’ll open a business checking account.
But wait—don’t just stroll into your regular bank. The bank you use as a consumer may not meet the needs you have as a business. Investigate the banks in your area to determine which one has the best terms for your business needs, from the minimum balance requirements to the fees you’ll be charged over time.
Consider opening up separate accounts so you can easily organize your money into different “buckets.” For example, you might have a separate account for collected taxes, another for estimated income taxes, and another for general business expenses.
It’s so simple to set up a website these days, even your grandmother could put together a nice-looking page in about 20 minutes.
Don’t overcomplicate things to begin with: even if you start with a one-page site that simply displays your phone number and headshot, that’s OK. The important thing is to have something that greets potential clients when they search for you and gives them the impression that you’re a trustworthy professional.
Your site doesn’t have to have all the bells and whistles yet. To begin, include a photo, brief blurb about what you do, and contact details so people can get in touch with you. That’s it! You can add other elements as your business grows.
If you’re shy about putting up anything less than the very best website on the internet, take heart: many of your favorite businesses started out modestly. (Try this: check out the WayBack Machine to see what they looked like a year ago, five years ago, or even during their very first months of existence!)
With that in mind, here are the next steps for setting up your website:
OK, you’ve set everything up, so now how do you get the cash to flow from point A (your client) to point B (your bank account)? There are numerous ways to accept payments—from the very basic to the complex.
Your choice will depend on the nature of your business. If you’re just issuing a few invoices a year, then maybe paper checks will work just fine. But if you want to be able to do recurring billing, accept ACH or credit card payments, you will need to establish a merchant account. In this case, you might want a bit more power behind your payment processing system.