How to Avoid Making Three Easy Mistakes in the Gig Economy
August 26, 2019
Business Development Specialist
Some have also named this a “side-hustle”, or a way of supplementing income. Examples include becoming an Uber driver, “flipping” or reselling items on eBay, flipping homes, drop shipping items online, lawn services, and much more. With the internet, making opportunities for supplementing income easier than ever before it is important to understand how to approach starting a new “side” venture. Here is a list of things you should ask yourself and research first before jumping into a new business or venture.
- Taxes
Yes even if you are flipping items on eBay you should be collecting sales tax. In order to do this you should contact the Texas Comptroller’s website and apply for a sales tax permit. The tax collected on items should be reported either monthly or quarterly depending on your monthly earnings. Failing to report sales tax can land you in financial and legal trouble. Also reporting the income you earned during the year to Uncle Sam is very important. Keep track of expenses spent on your venture to claim exemptions at the end of the year.
- Should you file an LLC?
Most people who are independent contractors tend to work under their own name. For legal purposes, these are considered Sole Proprietors. This makes you the sole owner of the business and liable for debts. You can choose to file an EIN or Employer Identification Number with the IRS. With this number you can avoid giving out your SSN and use the EIN instead, it is free to set up online. If you choose you can also operate under an assumed name this can be done at the county level (depending on where you live the charge for filing varies). An LLC or Limited Liability Company is a legal entity filed at the State level. An LLC will cost you $300 plus a $1 name search fee. The State of Texas will make sure no one else in the state has that name you have chosen before confirming your company. The benefit of filing an LLC over operating as a Sole Proprietor is liability protection. Typically, you can get an LLC in less than 48 hours. Note: Consult a business advisor or business attorney before deciding on which entity to file, special cases may warrant one over another.
- Researching the market
Most people that hear about a possible opportunity to make a little extra cash tend to overlook a very important factor, market demand. If you live in Eden, TX, does it make sense to become an Uber driver? Probably not. What restriction will this venture have on your time and day-to-day life? What is the potential ability for earning and how long will it take you to start making money? In flipping items for sale on eBay you may find an item at a garage sale worth four times what you paid but it doesn’t necessarily mean you’ll sell it right away. Take the time to understand the industry you’re wishing to jump into and how long you will have to work at it before you will see positive results. You could avoid wasting time and money.
“Business Tips” was written by Alejandro Castanon, Business Development Specialist of Angelo State University’s Small Business Development Center. For more information on the topic of this article or the services of the ASU · SBDC, contact him at Alejandro.Castanon@angelo.edu.