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Things to Consider When You Start a Side Hustle

Lots of people make new year’s resolutions to make more money. One way to do that is to start a side hustle. In this economy, people are working full time jobs and often participating in the gig economy. The gig economy is characterized by temporary flexible jobs performed by independent contractors, or freelancers. We will refer to both as consultants. If you have a creative or technical skill like web design or healthcare management, you can easily start a side hustle as a consultant. Here are a few things to consider when working your side hustle.

Work Scope

First, any consultant should clearly state the services she will provide. As an attorney, I, of course, recommend having this in writing. It is critical to identify what services are included in the work scope. For example, a web developer should identify what if any maintenance, technical support, or upgrade services are included. It is also a good idea to note what services are not included. A well written work scope is the best way to avoid or alleviate confusion about performance. A written agreement is especially necessary with on-going or complex project work.

Payment Terms

Second and equally as important as the scope of work, are payment terms. It is imperative to effectively negotiate and precisely document the agreed upon payment terms. It is smart to document the amount, frequency, and acceptable methods of payment. Additionally, make sure your invoices are consistent with any other written terms or agreements. For instance, if there is an agreement that specifies an hourly rate, related invoices should also show hourly charges. And agree upon when and how additional fees may be incurred.

Intellectual Property

Intellectual property is an important matter to consider in your side hustle. Consultants who create or develop copyrightable works or licensable technologies should know who has what rights to specific work, technology, inventions, patents, or ideas. Copyright protects original expression of ideas in various media. Technology licenses are agreements between licensors (seller) and licensees (buyer) on use of technology. You may or may not want to grant any intellectual property rights to your work. However, the market may demand that you do. Therefore, identify and understand what intellectual property you may have, use, or develop in your side hustle before unknowingly licensing, selling, or giving it away.

Relationship of Parties

Last but certainly not least, as a consultant you need to understand the relationship between you and your clients. It may seem obvious that a consultant is just that, but it is still worth noting. More clearly, as a consultant you are not an employee of your client. A consultant typically acts under her own discretion. These points are important because you will not be paid as an employee and, therefore, may be subject to self-employment tax. Moreover, you may want to form a separate legal entity, such as a corporation or limited liability company, for your side hustle. A separate legal entity can protect your personal assets but requires careful management.

In conclusion, remember to define the scope of work, payment terms, intellectual property rights, and consultant-client relationship in your side hustle endeavors. I recommend using a standard form that may also address other provisions, such as, term and termination, indemnification, assignment and transferability, governing law, and dispute resolution. When you deal with bigger clients, they will likely require you to sign their own agreement. In those cases, be sure to review and understand all documents before signing. In my opinion, seeking the help of a knowledgeable lawyer is always a good idea before signing business agreements.


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