Contributed post
Regular readers of this blog will know that there are simple side hustles that are easy to start over a weekend. Anyone looking for inspiration can check out the Boost My Budget post by following the link. And, it’s well worth perusing as a side business is a lucrative way to bring in extra cash. Come on – we all need more moolah to ensure the bills get paid.
Running a business separate to the one you have now, or your job, does come with caveats, however. Most people don’t know or choose to ignore, the fact that the income is taxable. Yep, HMRC wants a piece of the pie and they will hit you with fines and jail time if they don’t get their cut. Simply put, lots of entrepreneurs run an illegal hustle which isn’t legitimate.
Now, this should worry a pillar of the community such as you because there are repercussions. Two have already been mentioned, but there is the real chance the business will go bust and you’ll lose money. It’s better to be honest in life, and here is how.
Report It, No Matter What
It’s easy to view a few quid as nothing special. It isn’t as if the amount is going to make a great deal of difference to the government. Still, tax laws state that the money derived from any gains needs to be declared with the relevant authorities. There is no mention of an amount; simply claim and let the taxman do his job. As a rule, the smart move is to follow this advice, especially when the money goes into your account. Cash-in-hand is easier to hide as there are fewer ways for HMRC, Her Majesty’s Revenues and Customs, to prove the source, but online banking leaves a trail. So, please don’t think you can get one over on the tax office because the government always wins in the end. Anyway, owning a second business can help in some scenarios. Consider the company loses money and is in debt. Sounds bad, yet the amount is deductible from your earnings for the year. Yes, declaring losses can lower tax bills and save people money in a cruel twist of fate.
Separate Hobbies From Business
The government only lets this happen when an entrepreneur can prove that the side hustle is a legitimate company. They may see something such as blogging as a hobby that is a nice little earner but not a proper organisation. If that happens, the losses can hurt instead of help your finances. Without a shadow of a doubt, the easiest and clearest way to separate a hobby from a business plan is to create a formal structure. Sole traders, for example, are similar to regular Joes who hustle for money, yet the legal system recognises them as an official entity. It’s amazing how a licence and a piece of paper can work in your favour. A sole proprietorship, however, isn’t the savviest option as it puts personal assets at risk. Instead, opt for an LLC, Limited Liability Company, where there is a buffer between the business resources and your own.
Dress The Part
What does this mean? Well, in short, it implies that a person should look and act the part even if they don’t have the right accreditations. Although setting up a formal business structure is easy, it’s not always the correct move. Sole traders put personal items at risk, while an LLC means that you have to dilute power. This is your business and you want to be in control, which is why people wait before pulling the trigger. In the meantime, it’s essential to dress the part so any disputes will work out in your favour. For example, you can register a business name with the local authority and obtain a licence for trading. Licence regulator and operator, Gov.uk, can guide you through the process. Other tricks include investing in a website, generating customer feedback, and paying for a logo. The latter is extremely helpful as brand icons are synonymous with major companies. All of this should convince a judge that the “firm” is above board.
Develop A Routine
Legitimate side hustles don’t feel genuine when you’re spending a few hours a week on the project. They feel like hobbies which you would love to catch fire, but probably won’t in the grand scheme of things. Your attitude towards the business can make all of the difference. How will anyone else think the company is legit if the owner doesn’t even believe? The answer is they won’t. So, the trick is to treat it as a full-on SME. Start by investing in marketing strategies, online and offline, and conducting meetings. Also, try hiring a few members of staff and setting up a wage structure. Payroll recruitment agency, Portfolio Payroll, has all the tips if you need inspiration. If possible, try and land a cheap rental agreement. Office space is a sure-fire way to look and feel proper. After all, working out a bedroom is handy but not very professional.
Network The Industry
Business is a dog eat dog world where you can trust no one. Still, it makes sense to develop bonds with other entrepreneurs just in case you need an act of kindness. Granted, they won’t pitch in if they can help it, but that’s why one should do them a favour in good faith. Then, they will have no other option than to do as you ask. Business expert, the Harvard Business Review, has more if you want to learn the art of asking for a favour. Why is this important? Well, should the authorities come and knock on the door, then you’re going to need references. And, they need to be rock solid to prove that the firm isn’t dodgy. A vote of confidence from a market leader and reputable businessman or woman will go a long way in a hearing. Sure, it seems like overkill now, yet it’s amazing how many illegitimate SMEs are on the HMRC’s radar.
Have you started a side business? Do you need to take care of any of the issues above?