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2023-12-16

Choosing the Best Business Entity for Your Side Hustle

Jacob Miller

Discover why an LLC may be the best business entity for your side hustle, including state nuances, example scenarios, and other key questions to consider.

What Business Entity is Best for Your Side Hustle

If you're considering starting a side hustle, one important decision you'll need to make is what business entity to form. One popular option for many side hustles is an LLC, which stands for Limited Liability Company. An LLC combines the limited liability protection of a corporation with the pass-through taxation of a partnership or sole proprietorship.

What is Unique About People Who Care About Forming an LLC?

People who are interested in forming an LLC for their side hustle are often looking for a business structure that offers limited liability protection without the formalities and restrictions of a corporation. They may also want the flexibility to manage the business in a way that suits their individual needs and goals.

Nuances by State

It's important to note that the requirements and regulations for forming an LLC can vary by state. Each state has its own rules regarding the formation process, filing fees, annual reporting requirements, and more. Before choosing to form an LLC, make sure to research the specific requirements in the state where you plan to operate your side hustle.

Example Scenarios

  1. Freelance Graphic Designer: If you're a freelance graphic designer operating a side hustle, forming an LLC can offer you personal liability protection in case of any client disputes or legal issues related to your work.

  2. Handmade Jewelry Seller: For individuals selling handmade jewelry online as a side hustle, an LLC can provide credibility to customers and protect personal assets in case of any product-related disputes.

  3. Fitness Instructor: If you're a fitness instructor offering classes as a side hustle, forming an LLC can help protect your personal assets in case a client sustains an injury during a class and decides to sue.

Other Questions to Consider

  • What are the tax implications of forming an LLC for my side hustle?
  • Do I need to create an operating agreement for my LLC?
  • How do I choose a registered agent for my LLC?

By carefully weighing the unique aspects of your side hustle and considering state-specific regulations, you can determine if forming an LLC is the best business entity for your entrepreneurial endeavors.

For a simplified way to generate legal contracts for your LLC and other business needs, check out Contractable, an AI-powered contract generator.