6 Common Mistakes Side Hustlers Make—and How to Avoid Them

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Andre Spicer, a business professor, was delighted when his 5-year-old daughter expressed interest in an entrepreneurial endeavor. He couldn’t have foreseen the outcome, though: a firsthand lesson in side hustle mistakes and a nearly $200 fine, according to a July article in the Telegraph.

Spicer and his daughter decided on a lemonade stand and set up shop on a busy sidewalk near their London home. They quickly attracted customers and sold out.

Unfortunately, the father-daughter duo also attracted the attention of local law enforcement.

An officer approached and “read a lengthy legal statement—the gist of which was that because my daughter didn’t have a trading permit, she would be fined £150,” Spicer wrote, an amount equal to about $200. His daughter burst into tears and repeatedly asked, “Have I done a bad thing?”

This experience is a cautionary tale for side hustlers and other small-business owners, proving that it’s all too easy to run afoul of the law when you try to launch a side business.

6 Common Legal Mistakes Side Hustlers Should Sidestep

Ignorance of local business laws and legal requirements could result in hefty fines and fees. These needless costs can set you back or permanently damage your side business.

You probably can’t afford to make such mistakes with a fledgling side hustle. Here’s a look at common ways your side hustle could break the law—and how to make sure it doesn’t.

1. Failing to Get Proper Business Licenses and Permits

Let’s start with the example of Spicer and his daughter. They were fined for operating a business without proper permits. Business laws in the US differ from those in the UK, but ignoring them could land you in similar trouble.

Here are just a few of the permits and licenses you might need to offer services or products.

  • Local business licenses: Most cities or counties require business licenses and will levy fees or force you to suspend operations if they discover an unlicensed business. Your local Small Business Administration (SBA) office should be able to help you sort through the local rules and figure out how to get a business license.
  • Occupation-specific licenses: There may be regulations for the specific kind of business you own. For example, you’ll likely need a specific license for a side business preparing or selling food or providing home-based child care.
  • Federal business licenses and permits: The SBA provides a list of federal business licenses and permits you might need, such as liquor licenses.
  • Doing business as: If the customer-facing name you use for a business differs from its legal name, you’ll have to file the former as your doing business as (DBA) name. You can do so by filing a DBA application with your local government office, which usually includes a fee.

Though some requirements are obvious, side hustlers often won’t find out about lesser-known permit requirements unless they check local commercial regulations regularly and thoroughly.

2. Violating Local Zoning Laws or Your Lease

Many side hustles and startups are homegrown. But when you start a commercial enterprise in your home, you can run into legal red tape.

Taking the time to ensure your business is properly zoned will prevent costly fees or a shutdown of your new business. Check the following documents for rules and restrictions on doing business out of your home.

  • Local ordinances and zoning laws: Your city or county might restrict businesses from operating in certain residential areas, and some local laws might allow only certain kinds of home businesses. You can find and review those rules at your city or county clerk’s office, on municipal government websites, or at your local library.
  • Your lease agreement: If you have a landlord, be sure that your business operates within the terms of your contract. Many leases have clauses that forbid subletting or short-term renting, for example, which could kill an Airbnb side hustle.
  • Your homeowners association (HOA): If your home or condo is in a neighborhood governed by an HOA, check out its rulebook (often called a Declaration of Covenants, Conditions, and Restrictions) for any rules concerning home businesses.

The above regulations might also limit how or when you can operate your business. For instance, an on-the-side carpenter who works in the evening might violate quiet hours or noise ordinances. A sign advertising an in-home hair salon could be considered an eyesore by an HOA.

You don’t automatically have to accept a “no” you get from the city, your landlord, or your HOA, though. Check for a way to appeal the rule and to ask for a variance or exception.

3. Infringing on Your Employment Agreements

You probably don’t want your side business to get you fired from your day job, right? Avoid this outcome with a full review of your employer’s rules and the hiring documents you signed, including the company’s employee handbook and policies, your employment contract, and any nondisclosure or noncompete agreements. Watch for language that clarifies whether your business would violate any of your contract clauses. If these documents don’t offer clear answers, ask a human resources manager.

Even if your company allows side businesses, you should proceed with caution. Avoid conflict between your employment and side hustle with these tips.

  • Work on your own time and on your own property: Don’t work on your side hustle on company time. And don’t use company property to work on your side hustle, either, whether it’s a company-owned laptop, email address, or software service account login.
  • Don’t use your employer’s intellectual property: Never use employer-owned proprietary knowledge, trade secrets, contact lists, or other materials for your side business.
  • Differentiate your side business from your employer: You shouldn’t be competing with your employer. If your business is similar, try to serve a separate target market, and make sure your products or services are sufficiently unique.

Better yet, build a business that’s completely different from your day job. You’ll avoid these legal issues and prevent side hustle burnout.

4. Skipping Business Liability Insurance

Protecting your business from legal issues includes insuring yourself against lawsuits and other legal actions people might take against you. Business liability insurance covers judgments as well as the costs of defending lawsuits.

Take the example of Student Loan Hero writer Kat Tretina, who built her own pet-sitting business on the side. She’d heard horror stories about sitters being held responsible for a pet damaging furniture or for a burglary after losing a key, so she knew getting her own policy was a must.

Many sharing economy–based companies such as Rover, Uber, and Airbnb include insurance as part of their services. Owners starting up on their own, however, will need to find and purchase their own business liability insurance.

5. Mishandling Business Taxes

When you start a new business, it’s crucial to set out with the end in mind—specifically, the end of the fiscal year, when you’ll have to file taxes for your side business.

Complicated business tax codes make it easy to file an erroneous return or fail to claim an important deduction. Either mistake can cost your business money or draw the scrutiny of the IRS.

Forestall unexpected tax bills or penalties and fees from missed tax payments by following some business tax best practices.

  • Set aside money for taxes or pay taxes quarterly: By setting aside money and paying on time, you’ll avoid late fees, penalties, and sky-high tax bills that you can’t afford come April.
  • Keep all receipts for business purchases: This will make it easy to calculate and write off your side hustle costs—and cover your bases in case of an audit.
  • Separate business funds and purchases from your personal finances: Keeping separate accounts for your business will help ensure you don’t mix up any expenses.
  • Create a specific place and time to work on your business: Having a set number of hours per week and square footage you dedicate to your business will make it easier to track and deduct business costs when you file taxes.
  • Pay others appropriately: Say you have a friend who runs your books for you. Is she your employee or a contractor? You’ll need to know the difference to calculate taxes you owe and file appropriate income tax forms.
  • Choose the right business structure: Do you run a sole proprietorship, general partnership, or limited liability company? You need to know, because how you set up your side business will affect how you pay and file taxes.

6. Trying to DIY When You Need Professional Help

The above tips offer some great guidelines to get a side business up and running without too many legal hang-ups. But at the end of the day, they can’t replace professional legal and tax advice.

Local business laws and regulations can vary widely, as can your personal business plans, structures, and management systems. You can and should read up on commercial regulations and tax codes, but the best way to know for sure that your side hustle complies with all legal and tax concerns is to hire a professional.

An hour with a lawyer or accountant is a worthwhile investment to shore up your business practices and ensure your operation is on the right side of the law. When in doubt, hire a professional to clarify any fuzzy areas. Your growing business—even if it’s just a lemonade stand—could depend on it.

Starting a side hustle takes some planning, but it can really pay off if it’s done right. For help finding loans and getting your business off the ground, take a look at Credit.com’s Small Business Loan marketplace.

Image: monkeybusinessimages

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5 Gig Economy Websites That Help You Make More Money

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In the United States, the way people work is dramatically changing.

The proliferation of the gig economy is shifting the American worker’s view of nine-to-five employment and creating endless possibilities for earning extra cash to help pay the bills and make ends meet.

According to a recent analysis of gig economy and workforce data conducted by Nation 1099, about one-third of all US workers did at least some freelance work last year. What’s more, about 11% of all workers are full-time freelancers and about 22% have embraced side hustling or moonlighting.

Giant gig economy platforms such as Fiverr and Upwork may be well known, but there are quite literally hundreds of similar sites, with more popping up every day. A growing number of these sites specialize in offering niche services—ranging from voiceover work to dog walking, engineering, financial consulting, and website development.

“When it comes to freelancing and the gig economy, all signals show it’s growing even larger,” said trends expert and public speaker Daniel Levine, founding director of Avant-Guide Institute. “What’s so great about these sites is they’re bringing together people from around the world. Borders are disappearing. Before you had to be in the same country for an employee and employer to meet.”

Here are five gig economy sites that can help you earn a few extra dollars or provide a springboard to a full-time freelance career.

1. Rover.com

Phoenix resident Melanie Lewis works at home while she pursues a career in writing. About two years ago, she searched for a way to supplement her writing income and a friend helped her find Rover.com.

Through the site, she makes anywhere from $500 to $1,000 extra each month, by either boarding dogs or offering dog-walking and drop-in services.

“One of my favorite things about Rover is that you set your own rates for the services you offer, so you control what you charge and how much you earn,” said Lewis.

The site, which operates in dozens of cities across the US and Canada, connects dog owners with a variety of services—dog walking, doggy day care, dog boarding, drop-in visits, and house sitting. Note that background checks are required for those seeking to work through the site.

2. Fiverr

Launched in 2010, Fiverr has become one of the gig economy giants. The site has tens of thousands of users who generate steady secondary incomes by offering creative and professional services—everything from graphic design to writing, translation, illustration, and marketing.

Fiverr’s global community of freelancers now includes more than 100 service categories and people doing business in 190 countries.

The site is named Fiverr because the starting price for services is a mere $5, but that’s just a starting point. Advanced sellers can augment their services, charging more money for additional tasks. For example, a copyeditor might charge $5 for editing, but add higher fees for formatting, layout, or rush turnaround.

In addition, the site just introduced FiverrPro, a higher-end initiative that matches curated, talented professionals with those seeking services.

3. Upwork

Previously known as Elance-oDesk, Upwork enables businesses and independent professionals from around the globe to connect and collaborate. It’s another giant in the gig economy. The range of work available through the site is mind boggling—everything from web, mobile, and software development to writing, administrative support, customer service, sales and marketing, and accounting and consulting.

Hourly and fixed-price jobs are available through Upwork. And the beauty of the site is that Upwork processes all payments and invoicing, eliminating the hassle of chasing down clients to get paid through a third-party platform. For hourly jobs, Upwork even offers payment protection, ensuring you don’t get stiffed for any work completed.

4. Babierge

If you have piles of baby gear and toddler toys sitting unused around the house, Babierge is made for you.

Babierge (a combination of baby and concierge) is a sharing economy platform for baby gear. Think of it as the Airbnb for baby gear. The site’s baby gear entrepreneurs rent, deliver, and set up baby gear, games, and toys at hotels and vacation rentals, and then return to pick it up on departure day.

Though you may not have heard of Babierge, don’t underestimate it. It has workers in 82 markets, with new locations added each week.

“When you look at the money you can make at Babierge based on the hours you put in, the pay is about $40 per hour,” said Trish McDermott, vice president of community and communications for Babierge. “Not bad for gig work.”

Some of the site’s most active workers make as much as $700 per month.

5. Efynch

One last up-and-coming site worth noting is Efynch, a platform designed to connect professional and freelance contractors and maintenance workers with jobs.

Operating in Washington, DC, Baltimore, and northern Virginia, Efynch currently has about 3,000 users and plans to expand to at least ten more cities on the East Coast by spring.

“In addition to skilled workers, anyone with a truck is basically a valuable commodity and can easily make $50 or more per hour on our site,” said cofounder Teris Pantazes. “I’ve had some people make more than $5,000 per month on my site as full-timers. Freelance or side workers probably average between $500 and $1,000 if they work a few evenings or a couple Saturdays.”

Modeled after Upwork but tailored to the contractor and maintenance crowd, the site offers a range of gigs, from simple manual labor tasks such as mowing a lawn to far more complex jobs such as carpentry.

Anyone can join the freelance movement. It just takes a little paperwork and planning. If the lifestyle speaks to you, you should fill out a 1099 and be ready to navigate the financial ins and outs of self-employment. Start by getting your free credit report and gain insights into how you can build your credit while you freelance. Embrace the hustle while maintaining a handle on your finances, and you’ll be set up for success.

Image: istock

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Confessions of a Side Hustler: How Full-Time Workers Keep Their Side Gigs a Secret

Many Americans are juggling extra gigs on top of their regular nine-to-five. According the Bureau of Labor Statistics, about 7.5 million Americans held more than one job in 2016. The figure rose by more than 300,0000 workers from the previous year, due in part to years of stagnant wages, a competitive labor market and the growth of the gig-economy. Of the multiple job holders, more than half, or 4.1 million, split their time between a full-time and part-time gig.

Having a side gig waiting tables after work is one thing. It’s when workers decide to turn their side hustle into a full-time business that things can get complicated.

For budding entrepreneurs, it can make sense to continue working full time until their new venture business is up and running. A full-time job provides a certain level of stability — like a consistent salary, health care, and other benefits.

Knowing when and if to disclose your new business with your employer is the hard part. For that reason, some entrepreneurs choose to keep their secret side hustle just that — a secret.

Some experts say an employer should know if you have any business interests outside of your daily work responsibilities. Others argue what you do on your free time is none of your employer’s business so long as you aren’t using company time or resources.

“Some employers really encourage their employees to work on side businesses because it stimulates creativity,” says Jill Jacinto, a millennial career expert at Manhattan-based career consultancy firm WORKS. On the other hand, she adds, some employers “might feel you are neglecting your current job or getting ready to make a move elsewhere.”

Beyond feeling ostracized by fellow workers or their employers, there are also potential legal conflicts or consequences to worry about, says Bruce Eckfeldt, founder of Eckfeldt & Associates, a business coaching and management training firm based in New York City and a master coach for career-assistance company, The Muse.

“Before you invest a bunch of time in your startup, make sure that your current employment agreement isn’t going to be a problem,” he says. If you happen to be launching a business in the same field as your current employer, there may be restrictions outlined in your contract that could come back to bite you.

In addition, you should do your very best to separate your new business from your day job as best you can. Separating your time and focus is a little more obvious — don’t work on your startup at your job — but you may also need to create some physical boundaries too.

“Build a solid wall between the work you do for you employer and for your startup. Separate email address, file repositories, maybe even computers and profiles if you’re really careful,” says Eckfeldt. He says this adds a physical level of separation between your day job and your startup. It also protects you against any claims you have used work time or resources on your startup. Doing so is common for many starting out, but generally considered unprofessional, and could breach the terms of your employment contract.

We interviewed several full-time workers who are secretly juggling side businesses along with their 9-to-5. We asked about their motivations, how they keep their other job under wraps, and the toll it has taken on their professional lives. To protect their identities (and their livelihoods), we have changed several of their names.

Here’s what it’s really like to live a double work life.

“I sell live crickets on the side.”

By day, Jason*, 32, is a project manager for a paint and flooring company in York, Pa.

After work, he puts on a much different hat as a pet food distributor. But he doesn’t sell Kibble ‘n Bits. His website, The Critter Depot, sells live crickets, which pet owners purchase in bulk to feed pets like snakes and large reptiles. Jason also operates a couponing blog under a pseudonym “Jason” and picks up Craigslist gigs in his free time.

“I like to get income from many sources, so I side-hustle,” Jason tells MagnifyMoney.

The husband and soon-to-be father of three says his ultimate goal is to retire as soon as possible. He plans to keep taking on extra work as long as he can manage it. He calls his full-time job “the bedrock” of his retirement plan.

“The full-time job, that’s the bedrock. That’s the foundation. If I had to sacrifice the other three [businesses], I would make sure I kept my full-time job,” says Jason. “Even if my side hustles got to the point where they were pulling in six figures alone, I wouldn’t get rid of my full-time job.”

On why he doesn’t tell his employer about his other income streams, Jason says he doesn’t want to blur the lines between his different businesses.

He’s careful to focus only on office work during office hours, and on his businesses when he’s at home. He doesn’t want to risk losing any trust at work.

“I don’t want [my boss] to think maybe I’m too zoned in on my side projects and not zoned in enough on my at-office projects,” he says.

For him, keeping his job in addition to the side income streams is all about keeping his family afloat.

“If I were a bachelor, I’d say you’ve got to put every ounce of your time into it. But the father in me says you’ve got to be level-headed because it’s not just you that’s relying on [your income], your whole family is relying on it.”

“I’m a travel agent when I’m not working on Wall Street.”

While Fred*, 45, was working at an investment firm in New York City, he developed an idea for a travel business. In 2009, he launched YLime, a concierge service that helps organize group trips for Americans looking to book travel to various countries for annual Carnival celebrations. Recently, he expanded his offerings to include travel packages to some African countries and wine tours on Long Island, N.Y.

His reasons for keeping his side business under wraps are simple: his workplace frowns upon employees having outside income.

“I’ve been on Wall Street for about 20 years now, and there is a certain culture in here. If they see you doing something else, it limits your growth,” he says. “They are not going to consider you for those positions because they assume you’ve already checked out to a certain extent.”

Although he says his company isn’t a conflict of interest for his position, he would be concerned if his higher-ups knew about YLime.

“Depending on your relationship with some people in the firm, some people may try to use that information against you,” Fred says.

“My bosses found out about my secret trucking business from a local news reporter.”

After a management shake-up at the Las Vegas gaming company where she had worked for a decade, 41-year-old project manager Marcella Williams thought her days were numbered.

Fearing she might lose her job, she decided to use her project management skills to open her own business on the side as a backup.

She launched CDL Focus, a truck rental and shipping company, in mid-2015. She rents two semi-trucks, primarily to people looking to obtain a commercial driver’s license. They can use her trucks to practice driving or to take the licensing test without going through an employer to gain access to a truck. Williams employs a driver for the other part of her business, which focuses on shipping.

She spent nearly $130,000 of her own savings and salary to bootstrap the business. In its early days, she admits it was hard to focus 100% on her day job while trying to get CDL Focus off the ground.

“The truth is, I probably spent a lot more time especially in the beginning working on the business than on my job,” says Williams. She gave her full-time job assignments priority and would shift her focus once her regular duties were completed, she says.

Williams recalls a time a potential truck client called her in the middle of a meeting with her supervisor.

“I’ve been in a meeting with my boss and my phone is ringing off the hook and he’s like, ‘do you need to get that?’” she says. In those cases, Williams says she tries to take the call after hours or send an prewritten reply so that she can respond later.

“You want to run your business and stay on top of it, but when you have a one- to two-hour conference call or meeting, you have to decide: are you going to screw over the person who is paying you?” she says.

After almost two years in operation, Williams caught the attention of a local reporter who wrote about her new venture. It wasn’t long before her employers found out.

The same day, her supervisor asked her into his office to be sure she wasn’t going to quit.

Now, she says, “[my co-workers] ask me ‘how is your trucking company going?’ in the middle of cubicle land.”

“I flip houses and sell bounce castles, and my employers have no idea.”

Austin, Texas-based Dennis* says he hasn’t quite mastered the ability to focus on his full-time job and ignore his side business until after work hours. The 31-year-old works as a logistics manager for a large technology company. About a year and a half ago, he and his wife took their savings and launched a real estate investing business.

Dennis and his wife buy, renovate, and resell homes. They learned the basics of house-flipping from a well-known investor in Austin. “Our first year we did 13 transactions,” says Dennis.

Excluding education and other startup costs, Dennis and his wife got into the market with $1,000 in direct mail advertising and about $15,000 spent fixing up their first property. They now earn between $20,000 and $50,000 on each home they flip. The couple says they brought in about $65,000 in 2016.

In 2016, Dennis also launched a pair of e-commerce stores, which sell bounce houses for children and clothing and accessories.

“I work on all three [projects] while I’m at my day job so it is hard, especially trying to keep everything a secret and not having co-workers see what I am truly working on,” Dennis says. “I know that I am not fulfilling my primary duties at my full-time job to the fullest extent of my abilities.”

To make things easier, the couple has hired a call center to take and record all calls from the real estate business, which are then addressed after Dennis comes home from work. He says he will do the same for the e-commerce stores as business grows.

His ultimate goal is to build up enough passive income to replace his corporate income. For now, he keeps his job for financial security, while he grows his e-commerce portfolio and his and his wife’s real estate business.

“The salary and stock incentives that we have right now are kind of hard to walk away from unless I had sufficient passive income that would replace what I have now,” he reasons. He has given himself two years to grow his businesses into self-sustaining operations. At that point, his stock in the company will be fully vested, and he can consider leaving for good.

“I’ve been blessed. I have a good education, and I’ve always had a good job, but ultimately my main goal in life is to be independent and not have to do the corporate grind,” he says.

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