So you want to start a side hustle? Maybe you have one already? Maybe you just want to see if you’re doing it right. Great! But where do you start? What are the steps?
I’m here to help. In this blog post, I am going to show the 5 steps I take to start every single company.
Here are the 5 steps to take:
- Form a limited liability company in your state.
- Get an Employer identification number.
- Open Bank Account with your LLC and EIN.
- Check with your city – apply for a business license
- Keep good records: Don’t mix Business money and Personal money.
Form a Limited Liability Company in your state
Different states have different requirements and costs, so it’s worth doing your research before deciding where to form your Limited Liability Company.
Most people choose LLC’s. LLC’s offer the most protection, and they are the easiest to set up. You can have one person or multiple.
By default, LLCs are taxed as sole proprietors. So just forming an LLC won’t affect your taxes. But it will give you the foundation you need to become an S-Corp and protect yourself. (you can learn more about this in my business course)
Most people don’t choose corporations. Corporations are best for people who want to raise funding and issue stock.
A limited liability company (LLC) is suitable for 99% of business ideas. Plus, you can always change it later!
Get An Employer Identification Number
What is an EIN?
An Employer Identification Number, or EIN for short, is a unique nine-digit number identifying your company. It’s used in place of your social security number when you file taxes and do other business-related financial transactions.
It’s a social security number for your business.
You don’t necessarily need an EIN to start on many platforms, such as Amazon’s Seller Central, which provides free seller accounts without one. Still, if you plan on hiring employees, building business credit, or acting like a real business, then you need one.
Did I mention that EIN’s are free?
If you need step-by-step instructions on how to get your EIN, check out this blog post I wrote.
OK OK I’ll just give you the link
You can apply online through the IRS website by clicking here, which links directly to their application form. Fill out all fields with accurate information, so they know who needs this ID!
Make sure that your LLC name and the name on the EIN match! This is very important. The states and the IRS don’t talk.
Open Bank Account with LLC and EIN
You will need to open a bank account in the name of your LLC. This is where all profits from this side hustle will go.
Almost all banks will offer business services. I prefer local credit unions, Chase, or Hatch (Hatch is an online-only business checking). Just stay away from Wells Fargo.
The bank will want to see a few things:
- Your Articles of organization (the LLC paperwork from the state)
- You EIN
- Operating agreement (only some ask for this)
Make sure you have these ready before you ask.
Check with your city. Do you need a business license?
Different cities have different licensing requirements for side hustles. Make sure to follow these guidelines.
Don’t worry though; it’s just a few questions and a little bit of money. Cities just want to make some extra money and make sure you aren’t doing anything bad that can affect your neighbors.
It cost me $75 to get a business license in my city.
Keep Good Records
My favorite step!
Money will come into the business bank account. Spend that money on business expenses or on things that you need to run your business.
When you want to take profits, do this:
- Transfer money from your business account to your personal account.
- Label that transfer as an “owner’s draw.”
By doing this, you are maintaining separation between yourself and the business.
This is what we want. It’s called respecting the corporate veil. It’s a very good habit to adopt.
Only spend business money on business expenses. Personal expenses come out of your personal account.
I use Quickbooks to keep track of all of this for me.
Note: It is imperative to keep your business and personal money separate. It makes running a business so much easier! Trust me; I’ve made this mistake.
Start Your Side Hustle Today
That’s it! Now you have everything you need to start your side hustle and stop being a normie.
If you like the way I teach, check out Vanader Business School. I’ll teach you all of these tips in-depth, along with many other great business skills, so that I can help turn YOU into the entrepreneur you’ve always wanted to be!
Evan
