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Congrats—you started a business! You followed your dreams and started making money selling your products or services. Fast forward a bit, and after a lot of sweat equity, you are killing it! Sales are better than expected, and you are now ready to hire some employees. Your small endeavor is now a real business. Before you move to the next phase, it’s time to make it official.
If what I described above sounds familiar, then we are in the same boat. After years of blogging, I’m ready to move to the next phase and register my side hustle as a business. That means for all intents and purposes, the business will no longer operate under my name and social security number as the owner. It will now have its own entity name, or EIN, and be separate from its ownership.
The question now comes: how do you go about doing this? As an LLC or S Corp, does your business need a trademark or copyright? Unless you are a lawyer and/or a CPA, all of this may seem overwhelming. However, today there are easy ways to register your side hustle as a business, protect yourself, and maybe even lower your tax liability too. Read on to learn more.
Which Entity Structure Should You Choose?
When you started your side hustle, you knew you would have to register it as a business at some point, but you didn’t want to get ahead of yourself, which is understandable. There are costs associated with forming an entity, and I always say that you should avoid spending money until you have to. Which structure is best for your business? Use the descriptions below as a guide:
LLC vs. Sole Proprietor
The biggest difference between an LLC and a sole proprietorship is the legal separation between you and your business. LLC stands for Limited Liability Company, and one of the main reasons to file an LLC is to separate yourself from any liability from your business actions. Under an LLC, there is a shield between yourself and your business, meaning if you were to be sued, your personal assets would remain protected.
Even if you are in a safe industry, it is always good to separate yourself from your business because you never know what can happen, especially as your business continues to grow. Keep in mind that LLC is only a legal entity and does not change your tax status. You would still file your 1040 and Schedule C for your business expenses as you would with a sole proprietorship.
S Corp Vs. LLC
If your company is growing to a point that contract workers should be employees, then you need consider forming an S Corp. With this entity, you will pay employees, including yourself, through payroll. This type of business formation is a big jump when registering your side hustle as a business, so it may not be the most logical next step.
Under an S Corp entity, you can pay yourself a “reasonable” salary as the owner of the business and will be subject to taxes only on that amount which would be withheld from your check via payroll. As a result, you would no longer be responsible for paying a self-employment tax of 15.3%, essentially saying yourself money. However, one should note that the money saved will likely be spent in other areas. Forming an S Corp is more expensive, the tax prep fees are higher, and you have the added expense of having to run payroll taxes for your employees. If you don’t have to form an S Corp, it may be worth waiting and saving the money until you do.
Trademark vs. Copyright
Now that you have some clarity on registering your side hustle as a business, the next task you might want to tackle is protecting the name of your business and the work you have created via trademarks and copyrights. If you want to protect the name of your business, the logo you created, or a catchy slogan you use, you need to have it legally trademarked. This will protect you from having anyone do business under your name and profit from it.
Depending on your industry and the type of products you market and sell, you may also need to look into a copyright. Copyright protection helps protect the material you create, such as songs, art, films, books, and other creative works. It also allows you to charge for the use of said work and prohibits others from using it without your consent.
How to Register Your Business
You may have an idea of the way to you want to structure your business at this point. You might even be considering trademarking the name. The question is: how do you go about it? Forms can be tricky, and requirements and fees vary from state to state. Also, keep in mind that if you aren’t familiar with the process and make a mistake, you will not receive a refund.
When registering my business, I knew I did not want to take my chances and just wing it. Asking for a referral and hiring an accountant or lawyer to do the work for you is always an option. However, these can be costly. That’s why I was excited to learn about LegalZoom, a technology company that believes everyone should be able to legally protect themselves and their business and helps customers to create legal documents online. LegalZoom has everything you need to file your LLC, S Corp, trademarks, or copyrights, and you can use their system to make your business official – and gain some peace of mind with LegalZoom’s 100% satisfaction guarantee.
If it’s time to take your side hustle to the next level, LegalZoom is a great way to do just that. I’m excited to take the next steps to make my business more successful, and I can’t wait to watch its growth. Are you ready to do the same?
*This is a sponsored campaign with LegalZoom. All opinions are my own.