A side business is a way to improve your financial future, and the extra income can help you meet important financial goals. But sometimes your sideline can become your main occupation and change your whole life.
Are you thinking about taking the plunge and pursuing your sideline full time? It can be an exciting prospect. However, this transition can lead to many emotional questions and financial decisions.
Working with Block Advisors’ tax professionals, we will talk about both the financial and the emotional side to make your side your main business. Because while the income potential is great, there is a lot about taxes and other things that you need to know. Get help from trusted tax professionals at Block Advisors >>>
Today I’m going to share with you what you need to know before your side business becomes your main business.
From secondary business to main business: My personal experience
As you start moving around the page, you will likely try different options before you find something that works for you. Personally, I tried a handful of sideline jobs before settling into freelance writing.
As a recent university graduate, I got a state job in my field immediately after graduating. But since my field of wildlife biology wasn’t paying very well, I knew I needed a side gig to make things work. I decided to try my hand at personal finance freelance writing. My Masters in Management gave me the basic knowledge I needed to dive upside down.
Within two years I had the opportunity to stand by my side all day. Based on my personal experience, here are a few questions I would like to recommend before making your site your main business.
Are you enjoying the time spent on your side?
First things first, do you want to do your sideline full time? If you don’t particularly enjoy your sideline, you may not want to do it full-time.
Think about how you would feel if all of your work time was on your side. Unless you see yourself enjoying this hustle and bustle as your main source of income in the long term, consider leaving it in the side appearances category.
Personally, I enjoy writing about personal finances and helping others achieve their financial goals. Also, the flexibility of writing was tempting.
Do you want to be your own boss?
An integral part of working full time is transitioning to your own boss. As a side hustler, you likely have the discipline you need to be successful as your own boss. But is that a responsibility you want to take on?
I’ve always dreamed of becoming my own boss. The ability to set my own hours was a freedom I longed for. Additionally, the ability to dramatically increase my income on my own terms was a tempting factor that made the idea of making freelance writing my main occupation alluring.
Does your Side Hustle have solid expansion potential?
A key indicator that a side business has the potential to serve you full-time is the potential for expansion. Consider if there are more ways to bring in cash when you have more time on your day.
In my case, I knew that my time was the biggest limiting factor in my sideline. That made it a breeze to buy more time in my week. But make sure your side gig has a path to the income you need to fully support yourself.
Would giving up a steady paycheck weigh on you?
Take into account your risk tolerance as you near the tipping point. Many of us feel a certain degree of security in our daily work. So many of us cling to our daily jobs in the hope that our income will never go away.
Whether or not this sense of security is confirmed depends on your industry. As we saw in 2020, a “regular” job does not protect you from unemployment. With that in mind, switching to your sideline job all day might be the right option.
As a small business owner, you have the opportunity to diversify your income streams to create a sustainable business model that will hopefully survive the future of the market. But it’s understandable – and perfectly fine – to slowly move into your side business
Would you miss your “real” job?
When my side hype reached the tipping point, I knew I had a tough decision to make. At the time, I had a “dream” job as a marine biologist. However, the compensation was not enough to meet my financial goals.
With that, I decided to contact my employer and ask for a part-time position. I knew when I inquired that I might have to go away forever.
Fortunately, my boss was very understanding. We made a part-time arrangement in my day job that allows me to spend some time as a marine biologist in the field. However, most of my days can be devoted to writing for a living.
As you near your tipping point, think of creative solutions to reduce the workload on your day job. You may not suddenly have to dive into your part-time job full time when you have a flexible employer willing to work with you.
This is how you prepare financially and emotionally
When you know it’s time to get your side going all day, you are likely very excited, but also a little nervous about the unknown. Here’s how to prepare financially and emotionally for when your side business becomes your main business.
Expect ups and downs
The cash flow of many companies rises and falls with the seasons. As a freelancer, you may experience a workload from festivals or famine that is difficult to predict.
Knowing this possibility before you dive in is a good time to prepare. On a financial level, building an emergency fund can help you weather the business downturns of the future.
Don’t forget to take care of the emotional side of your own business beyond finances. Although everyone reacts differently, I found the process of using my sideline full time to be an emotional roller coaster ride. The struggle to find a balance that worked for me was prolonged. But at some point I found a happy medium that works.
Over the past few years, I’ve learned that having a solid emergency fund is vital to my safety as a small business owner. When I’m having a slow month, I don’t have to stress myself. Instead, I can continue to live below my means and fall back on my emergency fund if necessary.
Choose the right business structure
The right structure for your small business depends on your financial situation. The options include:
- one-man business
- S Corporation
Learn about the different options to determine the best fit. If you are unsure of the right business structure for your company, contact Block Advisors.
Block Advisors helps entrepreneurs and small business owners understand the tax implications of these complex decisions. You don’t have to rely on Google for the best answer when a trusted tax professional can help out at Block Advisors.
Keep accurate records
Proper accounting can help you manage your business efficiently. Not only can organized books help you make the right financial decisions for your business, but they can also make tax time less stressful.
You can do it yourself with online services, but if this seems overwhelming or takes too much time, you can find an accountant to help. In fact, an accountant is one of the first things most small businesses to outsource.
You should also open a separate bank account for the company. This keeps business and personal information separate and makes record keeping and bookkeeping easier.
Block Advisors provides accounting services as well as tax preparation so you have all your important financial documents in one place. Check out Block Advisors here >>
Don’t forget taxes
Although you are moving into a new source of income, you cannot forget about taxes. Many sideline activities forget this important piece of the puzzle. Unfortunately, this can lead to an unpleasant surprise at tax time.
Depending on your financial situation, your tax liability can amount to thousands of dollars in self-employment taxes each year. It is important to keep an eye on your liability year round. Depending on your tax structure (which we talked about earlier), you may also need to file quarterly estimated tax payments or collect other government filing fees.
If you have any questions, you can always contact a tax advisor. Block Advisors makes this easy by having tax professionals in your state who know exactly what to do for your business. In addition to bookkeeping, they can help you file your tax returns every year.
Consider opening a self-employed retirement account
Without a W-2 job, you won’t have access to the same retirement accounts that you are used to. However, there are many great self-employed retirement investment plans out there.
Don’t postpone saving for your future. Learn more about the best self-employed retirement accounts available today. Not only can you save for your future, but you can save a lot of taxes by contributing to one of these plans!
While standing on your side all day can be a big step, it can be incredibly rewarding. I have never regretted my decision to make my sideline my main source of income. The increased control and flexibility are second to none in my opinion.
Don’t let anything hold you back if you want your sideline to become your main occupation. But don’t forget to set up an emergency fund, set aside cash to pay taxes and save for your retirement.
Are you ready to take your sideline to the next level? Let us know!
And if you need help with the financial side of the equation, reach out to Block Advisors for the bookkeeping and bookkeeping help you need to transition from a part-time job to a full-time entrepreneur. Make an appointment here >>