When you started your side gig, you may have dreamed of turning into a real business all along. But for some people, they did not dream of business ownership. They just wanted to earn a little extra money, or perhaps they wanted to help pay for their hobby by selling some of what they make, but they weren’t really interested in launching a full-fledged legit business.
The problem is, if your hobby has turned into a business (you’re making profits), you may be required by law to get a business license or permits. If that is true, you could be subject to fines and late fees if you don’t do it. If you must go through that trouble, you may as well start a business to make it legit. Either way, in order to make a good choice, you should ask yourself these three hard questions before launching your online business.
How Much Are You Willing to Do Yourself?
For some people, they really don’t want to do all the legal paperwork themselves. They’d like to pass that off to someone they hire. Others feel more comfortable taking charge and doing things themselves. There is no right answer here, but it’s crucial to figure out if you’re willing to do the footwork yourself or if you need to hire someone to do it for you to go fully legit.
What is Your Budget Like?
When you have a legit business, you will have regular expenses that you need to pay for, including professional fees to lawyers, accountants, and others. You may also need to pay a monthly fee for your bookkeeping software. Once you set up your business legally, you must do your accounting the way the government wants you to do it based on your type of business. Plus, you’ll need to have the money for your business licenses, permits, and quarterly taxes.
How Much Risk Can You Take?
When you do not form a business entity and follow the laws regarding doing business in the USA, you may be subjecting yourself to undue financial risk. If you don’t choose the right business structure, you could be breaking the law or doing something against regulations without realizing it. By going legit, you will reduce your risk if you set up the right business entity, pay for the proper permits and licensure, buy the right kind of insurance, and avoid co-mingling your personal wages with your business income.
When you ask yourself these questions, answer them honestly as you can. If you’re not sure of the answer yet, you need to do some research. After all, you want to make sure that starting a legitimate business is what you really want to do (or not) before going through all that hard and tedious paperwork.
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