{"id":125,"date":"2022-04-25T08:50:10","date_gmt":"2022-04-25T14:50:10","guid":{"rendered":"https:\/\/dellaw.org\/?p=125"},"modified":"2022-04-25T08:55:28","modified_gmt":"2022-04-25T14:55:28","slug":"choosing-the-right-entity-for-your-side-gig","status":"publish","type":"post","link":"https:\/\/dellaw.org\/choosing-the-right-entity-for-your-side-gig\/","title":{"rendered":"Choosing the Right Entity for Your Side Gig"},"content":{"rendered":"

One of the most important roles a business lawyer plays in helping small businesses is helping to establish them as the right entity. These entities define a business and allow them to comply with local and state laws. Additionally, the right entity will yield a variety of tax benefits.<\/p>\n

With the rise of gig culture and operating side businesses, many people wonder if they need to be set up as sole proprietorships, an LLC or as a corporation?<\/p>\n

Sole Proprietorship<\/h3>\n

This is the simplest business structure and may be appropriate for one-person businesses, or where the business and owner are one in the same.<\/p>\n

Limited Liability Company (LLC)<\/h3>\n

A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because similar to a corporation, owners have limited personal liability for the debts and actions of the LLC.<\/p>\n

Corporation<\/h3>\n

The most complex business structure, corporations are often preferred by venture capitalists and other investors because they offer shareholders limited liability protection. A corporation may be an S-Corp or C-Corp.<\/p>\n

There are many factors to consider when choosing the right business entity<\/a> for your small business. Your lawyer can help you understand the pros and cons of each type of entity and help you choose the best option for your business.<\/p>\n

What is the Right Entity for Side Gigs?<\/h2>\n

The IRS allows taxpayers to file as sole proprietors for their side gigs. This is the simplest way to file your taxes and you can do it using a Schedule C.<\/p>\n

If you want to create a separate legal entity for your side hustle, you can form an LLC. This will give you personal liability protection and help you keep your business finances separate from your personal ones. You will need to file additional paperwork with the state and pay annual fees, but it may be worth it if you plan to grow your side hustle into a full-time business.<\/p>\n

You can also choose to incorporate your side hustle as an S-Corp or C-Corp. This is typically only necessary if you are raising money from investors or plan to grow your business into a large company. Incorporating can be complex and expensive, so it’s important to speak with a business lawyer before making any significant moves.<\/p>\n

Examples of Side Businesses<\/h2>\n

You may be wondering what a good example of a side business might be as it pertains to this post.<\/p>\n