When you start designing an income, it’s easy to get caught up in the excitement and forge ahead without proper legal protection. Consider this your wake up call – here are some of the most important side hustle legal considerations.


Regardless of the type of side business you’re trying to start, make sure you’re legally protected with some sort of agreement or contract when working with clients.

Freelancer’s Union has an easy to use contract building tool that handles most, if not all, important pieces – scope of work, ownership rights, payment details, and even stipulations for charging late fees.

The best contracts are those that have been reviewed with a legal professional who operates in the same state as you, and has a level of familiarity with local laws. This is a more expensive, but bulletproof strategy for contract creation.

Company Formation

It’s perfectly respectable to operate your side business as a sole proprietor, but there are a number of additional benefits that come with forming a business entity, like an LLC or S Corp. One of the most important is “the corporate veil” – a layer of liability protection that means a jilted ex-client can’t go after your personal assets. From a privacy standpoint, it also allows you to use an EIN instead of your social security number on official forms, like W-9s. You can then use this EIN to open a business bank account, which will make accounting at tax time much easier.

Speaking of which…


When you bill a client $600 or more in a year, they’re required to send you a 1099 form around tax time. But even if they don’t, it’s your responsibility to keep track of income generated by your business, and pay taxes on it. A failure to do so can trigger an audit, and a number of hefty fees. Make sure that you’re also keeping track of expenses, which effectively lower your total taxable income. And start looking into an accountant that specializes in small business owners or freelancers.


For a bulletproof liability line of defense, consider investing in business liability insurance. Hiscox is a well-known agency to start your search. Purchasing business liability insurance a smart strategy for a sole proprietor who isn’t protected by the corporate veil.

Side Hustle Legal Considerations

Start looking for an accountant/CPA, insurance company, and lawyer that specialize in working with small business owners and freelancers. You may not need all of them yet, but you likely will down the line. Don’t wait until the want becomes an immediate need!

If any or all of these professionals are out of your reach right now, you can still seek advisement from an expert. If you live in or near a large city, do a Google search to see if they have a small business advisory center as a division of local public offerings. They’ll be able to answer your business questions for free, and with a knowledge of local laws.

Are there any side hustle legal considerations that you’d add to this list? We’d love to hear from you in the comments below.