The college class of 2015 faces the best job market in years, but that doesn’t mean that everyone is ready to get back to the business of relying solely on a traditional career path for financial prosperity. Millennials remember the difficulties associated with the post-recession job market, and they remember seeing the hardships their parents faced.
It’s no surprise that many millennials are more interested in income diversity than they are in putting their faith in a long-term job with the same company. Indeed, 35% of employed millennials have started their own businesses on the side, and a growing number of millennials are hoping to replace a traditional job with non-traditional income. Technology makes it possible for many millennials to entertain these dreams — and even achieve them.
Whether you decide you want to go it alone completely, or whether you just want a little extra income on the side to pad your cash cushion or fund a vacation or two each year, it’s important to understand the issues that come with working for yourself (even if it is just part-time). Here are some of the things you need to keep in mind as you start your side hustle:
The first thing you need to understand is your workplace policies. You don’t want your side hustle to put your traditional job at risk, especially when you are first starting out and may not have a lot coming in. You should also be aware that it may not be considered ethical to use your work contacts to build your side business, especially if you are “stealing” clients away from your employer. There’s a reason for legal confidentiality language and non-compete clauses. Your side hustle should have nothing to do with your current employer, or be far enough removed that it won’t present a conflict of interest.
Finally, find out the policy regarding your ideas and products. In some cases, if you develop something while working for someone else, the company is entitled to it, or a share of the profits. Even if you do it on your own time, there are circumstances in which your employer may lay claim to your business idea. Be aware of the policies of your company and your state before you get too deep into your side hustle.
One of the mistakes I made when I first began freelancing was to neglect my taxes. I completely forgot about paying my federal and state taxes. I was in for a rude surprise on April 15!
Don’t forget about taxes when you start your side hustle. Consider adjusting your W-4 so that you pay a higher withholding to cover the tax you will owe on your side business income. You can also consider paying quarterly estimated taxes to the federal government and to your state. If you aren’t withholding extra, this is a good plan. I like to set aside a monthly amount in a special account. When it’s time to make my quarterly payment, it’s easy enough to write the check. Don’t try to “save up” your tax payment for once a year, though. When you underpay by too much, you could be subject to a penalty.
Legal Issues and Organization
At some point, you need to decide on an organization for your business. While it’s easy to operate as a sole proprietor, the reality is that this isn’t always the most tax-efficient way to handle the situation. Consult with a CPA or a small business attorney about the best organization for your business, based on your long-term goals and state requirements.
Realize, too, that a sole proprietor’s business assets are entwined with personal assets. Your business designation could protect your personal assets from a business lawsuit. Also, make sure you get your EIN immediately so that vendors will be more likely to do business with you.
A side hustle requires self-discipline. When you are trying to establish a side business, it can be difficult to motivate yourself to work more after you get home from a day at your traditional job. Not all people can force themselves to get up early and stay up late to make a side hustle work. You have to be committed to the side hustle and disciplined enough to make it work if you are serious about success.
With a lot of work, and an attention to some of the realities of running a side business, you can create success, whether you want to just keep your business a side hustle, or whether you want to grow it into your main source of income.
By Miranda Marquit, Staff Writer