It’s estimated that over 34.5% of the US economy is made up of professionals who are participating in a secondary trade or skill to earn income, outside of their full time job.

This segment of our economy is made up of many different services and products:

  • Selling products online through Amazon
  • Buying and Selling Real Estate
  • House Sitting
  • Pet Grooming
  • Courier/RideShare Services (Uber, Lyft, Grubhub, Shipt)
  • Virtual Admin Assistant
  • Copy-writing/Proofreading
  • Secret Shopper
  • Baby-Sitting/Child Care

But when do you know if you need to create an LLC for this side hustle? We think that there are three key questions that will make this a definable moment in your professional life. 

The three “Yes”s that will help you determine if you need an LLC are:

  1. Are you responsible for someone else’s assets or will someone be using a product you provide? 
  2. Is the income from this activity great enough for you to live on, without a full time job? 
  3. Do you work with someone else, in which you both share the benefits of the product or service you offer? 

Without-a-doubt the twenty-first century economy is not shy on opportunities. With the cost of living going up in certain cities, sometimes we have to find secondary sources of income to supplement our lifestyles. The success of any side hustle isn’t dependent on whether you create an LLC or not, however protecting the income and assets bought with that side hustle is. 

A great degree of consideration needs to be given in this area, as the “unexpected” is always lurking around the corner. But with some guidance and a big picture view of your potential, we will help you narrow down on the need for a Limited Liability Company. 

1) Are you responsible for someone’s assets or will they be using a product you provide?

There is a great degree of risk in most anything we do. However, providing a service or product is an activity that we participate in and is something we intend the “public” to use. This opens us up to State laws, and even though many people will agree to mediation in a small legal dispute, it doesn’t necessarily shield you from the decision that might not be in your favor. Every state has laws on the books that protect the everyday consumer of goods and services. Sometimes we view our side hustles with a certain degree of bias. 

For instance, if I’m House sitting once a month, I might think that my lack of frequency in providing this service makes my participation of small degree. But let’s weigh the cost of something that can occur inside of a Home. A broken faucet and sink, $750 dollars (with labor). A broken mirror that is part of a dresser drawer set, $300-450 dollars. And lastly, a kitchen fire because you decided to make fried pork chops the first night $175,000 to $600,000 dollars depending on the size of the house you are sitting for.

You might be thinking, well they have homeowners insurance and I can always have them sign a waiver. Well without appropriate terms and lengths to that waiver, something that now becomes uncovered by their home insurance now falls back on you. If you don’t have an LLC in place, protecting your personal assets from exposure to the service you provide, you are now at risk of serious financial loss. 

2) Is the income from this activity great enough for you to live on, without a full time job?

Countless side hustles across our country have grown from side hustles, into legitimate businesses. Oftentimes the owner is so distracted by the unexpected growth they never legitimately move to an LLC. As you may know this can be incredibly costly, and come with a great degree of regret if a liability sneaks up without you noticing. In addition, the implications of not appropriately setting an LLC up to save on taxes comes at an additional cost as well. 

So how will you know when it’s time to make the move to an LLC? Well the “magical number” is probably going to be different for everyone, as our lifestyles and cost of living are different. And to really encompass what that number may be, the trick is really determining what your full time job income is versus what your side hustle provides. 

Historically, the best measure is to ask yourself the question: If I quit my full time job today, with some creative budgeting and minor sacrifice could I legitimately live on my side hustle income? If the answer is yes, then you need to create an LLC. In addition, you need to weigh the pros and cons of working for yourself and growing what was a side hustle into a large successful business that you now have the pleasure of piloting. 

3) Do you work with someone else, in which you both share the benefits of the product or service you provide?

Not many side hustles include working with someone else, however on occasion they do. So how is this relevant to needing an LLC? It’s simple, many side hustle’s involving co-workers and relatives can go awry real quick, when an argument about how much of the income each person gets is now drawn into question. 

People view their individual contributions to a project or product differently. Especially if you are selling a product of your own design. Sometimes a product becomes so popular that one of the partners begins to fear that their recognition or intellectual rights to the product may be taken away, leading to a very rapid decline in the relationship between two very intelligent individuals. 

Instead of running that side hustle into the land of mystery, stop and get an LLC. One of the greatest aspects of an LLC is the Operating Agreement.  This agreement defines the assignment of rights to the assets, liabilities, income and losses within that business. Once you have a signed agreement in writing, you no longer operate with an element of fear for what your part of that benefit may be. Instead you have created a form of assurance over your stake in that side hustle and who knows, it may become a large and growing business one day. 


Simple Start understands that side hustles can become a large part of your financial interest in life. No doubt, like so many before you, an LLC will be necessary in creating the right protection and tax savings. Don’t let the mistake of not knowing when the appropriate time to get an LLC, prevent you from creating the protection that you need. Our knowledge and financial tools can help you create an LLC that will serve the needs of that side hustle, and lay a foundation for it to become a greater part of your life.

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