Let’s talk about side gigs–landscape jobs, renovation work, ride-sharing, real estate investing, and caring for others–and how they can be profitable. If you have been working your side gig as a sole proprietorship, and it’s not a hobby and profitable, then it’s time to consider making it into a full-fledged corporation.
Why would you want to do this?
- Protection of corporate structure
- Official business name besides your personal name
- You’re not personally on the hook for business liabilities
- Easier to get tax breaks
- Create business accounts like bank accounts or credit cards for the business
The drawbacks are that the LLC costs money to set up and maintain, and there are annual responsibilities. If your business is not profitable, do you want to spend more money to create an LLC?
The IRS looks down upon using businesses for hobbies and has strict rules about how to distinguish them. With new income regulations (delayed until 2024) regarding payments from Cash app, Venmo, PayPal, etc., the business formation may be a cleaner way to keep taxes separate from personal uses.
What questions do you have about business formation? We will be following up with posts on the next steps.
