Becoming an entrepreneur is an excellent way to increase your income, create job security, and enjoy the freedom of being your own boss.
Even if it’s not your primary source of income, you should be thinking about how you’ll keep your business and personal funds separate.
Formalize Your Business Structure
Consider a formal legal business structure for your enterprise. Forming a business entity such as an LLC or corporation has the advantage of bringing you liability protection and establishing that your business finances are separate from your personal finances. The IRS publishes a guide to the various options.
Keep a Separate Bank Account and Credit Card
Open a separate bank account for your side hustle. LMCU offers a Basic Business Checking account with no monthly fees and some useful perks for business owners. You can learn more about that here.
If your personal credit allows, consider obtaining a small-business credit card that earns rewards on everyday spending. The LMCU Business Rewards Visa has an ARR as low as prime plus 6.0%* and lets you earn rewards points for every dollar spent.
Make a Business and Budget Plan
Every business, big and small, should have a business plan in order to be successful.
If you’ve never drawn up a business plan before, look for a template online and customize it to your needs. For guidance, you can also speak with entrepreneurs in your personal or professional network.
Your business plan should include near-, medium-, and long-term goals, as well as an estimated budget with revenue and income projections.
Think About Tax Obligations
Yes, you have to pay taxes on your side gig earnings. If you don’t, you can expect a notice from the IRS, along with penalties and fines on top of any back taxes owed.
Set up a consultation with a certified public accountant or tax expert specializing in freelance and small-business issues. Your current accountant or DIY tax prep software might not be the best resource for complicated tax issues.
Side hustles have certainly become more popular and obtainable over the last couple of years. More people are discovering that they can start their own business while working a full-time job and create multiple streams of income. Some are even turning their hobbies into money-making businesses. Whatever you choose, pick something that suits your experience and schedule, and that can make a positive impact on your financial well-being.
Every business, large or small, needs a financial institution to call home – a single place to turn to for the many products and services essential to success and growth. LMCU can help you grow your business. Learn more about the products and services we offer here.
*APR = Annual Percentage Rate. Rates as of 05/04/20. Rates are subject to change. Lowest rate featured. Subject to credit approval and qualification. Other rates and terms available, contact us for more information
Topics: Wallet Wisdom