Years ago, I broke away from the traditional nine-to-five world and started working for myself. I wanted to do fulfilling work without fighting layers of bureaucracy or attending hours of company meetings. But I started my entrepreneurial journey slowly by creating a business on the side. Keeping my day job allowed me to test out my business ideas while maintaining my extra income.
Keeping my day job allowed me to test out my business ideas while maintaining my extra income.
If you also pine for the freedom and flexibility to do truly gratifying work and wake up excited about being your own boss, you can do what I did, too. Even starting a part-time business on the side has plenty of benefits. Today we'll look at critical financial issues to consider before you begin a venture that will help you succeed.
7 financial tips for starting a successful side hustle
Here's more detail on each of these must-know financial considerations before you become an entrepreneur.
1. Determine your business entity
When you work for yourself, there's a lot to do. You might need to look for new clients, create deliverables for current clients, bill customers, search contractors, or do a million other things. But one of the first tasks you should do is choose a business entity.
Your business entity determines your business structure according to the laws in your state. You'll need to know your business entity and name before getting a business bank account, insurance, or paying taxes.
However, choosing a business entity can also be a passive decision. If you don't register your business with the state, you'll automatically be a sole proprietor. That's why many self-employed people start as sole proprietors by default. In fact, if you're doing freelance work or have a small side hustle, you may have a sole proprietorship right now and not even realize it.
The reason you may not want to remain a sole proprietor indefinitely is that there's no distinction or legal separation between you and your business.
There isn't one best entity for a given business, and it's not a binding decision. As your business needs change, it's possible to change your entity. Some common business entities include:
- Sole proprietorship
- General Partnership
- Limited liability company (LLC)
- C corporation
- S corporation
Most small businesses start as a sole proprietorship and then change to a corporation or LLC as they grow. The reason you may not want to remain a sole proprietor indefinitely is that there's no...
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