More and more Americans are working a side job. We call it the “gig economy,” and it’s flourishing.
Maybe you’re taking on some extra projects to ease the strain of college tuition and have discovered a high demand for your skillset. Maybe you’re pursuing a passion in your off-hours that’s becoming increasingly lucrative. Or perhaps you’re a recent retiree consulting a few hours a week in the industry, and you have some concerns about how this new income might impact your retirement planning.
No matter how casual your initial interest was, if your side hustle is starting to thrive, it might be time to talk with a business planning attorney.
Has Your Side Hustle Outgrown a Sole Proprietorship?
Maybe you started out casually taking on work as an independent contractor, and receiving the income as yourself made sense. A sole proprietorship is an easy way to start a business, but it may not make the most sense over time. Forming a business entity such as a corporation or a limited liability company (LLC) may provide strategic benefits worth considering:
Asset Protection
As a sole proprietor, your personal assets may be reached by your business’s creditors. If your business is subject to a lawsuit or fails to make a payment, you could be personally liable. A properly formed and functioning corporation or LLC can shield your personal assets.
Tax Benefits
As a sole proprietor, your gig income is taxable as personal income. This income may bump you into a higher tax bracket, erasing some of the financial gain your side hustle provided. Additionally, if you continue as a sole proprietorship, you may be missing out on the tax advantages you can leverage by forming a business entity and receiving the income through the entity.
Retirement Planning
If you need to control how much income you receive to realize your retirement plan, forming a business entity allows you to control how much personal income you receive from your business.
Meet with a Corning Business Planning Attorney
For these reasons and more, you may want to consult with a business planning attorney and get some advice for your specific circumstances. While forming and operating a business entity such as a corporation or LLC requires up-front costs and some extra administrative effort, the protections, potential tax advantages, and peace of mind it can provide may well be worth the cost of the initial investment.
Find the right fit for your growing business with an experienced business planning attorney. Call Roth Elder Law, PLLC today to schedule an initial meeting at 607-962-6162 or complete this intake form and we’ll be in touch.