Who is going to turn down happiness or money? Nobody we know.
When approached the right way, a side business can be both financially and personally rewarding. The key to success is striking the right balance: between your “side” activity and your day job, between your extra income and tax guidelines, and ultimately, between taking risks and playing it safe.
Living a fulfilled and happy life should only improve your day-to-day work performance and satisfaction – and a side business can be a good source of personal fulfillment. The catch is, not taking time or focus away from the responsibilities of your day job. Consider setting up regular side business hours, just like you would for any other job. You might want to take it a step further, and find a dedicated space for this activity if you can. Committing to a well-planned routine is one way to minimize the risk to your current career, and your primary source of income, while you test the side-business waters.
When is the right time to dive in? Ideally, when you’re able to focus on passion over profit. It’s risky to build a personal business under too much pressure. If you can’t afford to fail, you’re setting the expectations dangerously high. If you already have a reliable source of income, or are comfortably retired, seek out opportunities to apply your interests or talents – and let the profit come second.
If, or when, the money starts to roll in, reevaluate your personal taxes. The guardrails you should follow all depend on if the Internal Revenue Service (the IRS) views your new activity as a “hobby” or a “business.” In short, if you engage in an activity for profit, then it is a business. Otherwise, it is a hobby. In reality, the hobby/business distinction is not exactly black and white. For guidance, the IRS has eight questions to help you sort it out. More detailed guidelines are also available on the IRS website. To be safe, discuss your individual situation with a tax professional.
Before you custom-order those new business cards, know this: there is no official rulebook to fall back on. You’re forging your own path. So, tread cautiously and find joy in the process!
Have you started a side business? We’d love to hear your words of advice or experience in the comments below!