So you’re not ready to quit your “day job,” but you want to start a business? Many entrepreneurs dip their toes to test the waters by launching their businesses part-time. In some ways, it’s the best of both worlds; you pursue your dream of business ownership while still bringing home a steady paycheck.
Although there are some considerations unique to starting a business part-time, you’ll find other aspects are the same as when starting a company full-time.
For example, you have to take the necessary steps to operate your business legally.
Make sure you can legally use your business name.Either check your state’s Secretary of State database or do a corporate name search to see if anyone else has registered the name you want. I also advise using CorpNet’s free trademark search tool to see if someone has already filed for a trademark on the name.
Select a business structure.
By default, your business will be considered a sole proprietor unless you file for a different legal structure. Operating as a sole proprietorship offers simplicity, but it does not separate your personal and business finances and liabilities. That means if your business is sued, your personal assets might be in jeopardy.
I recommend considering formally registering your business by either forming an LLC (Limited Liability Company) or incorporating (C Corporation or S Corporation) to protect yourself. Doing so shields your personal assets from the liabilities of your company.
Before talking with an attorney for guidance, you can start learning about the advantages of different business structures by using CorpNet’s Business Structure Wizard.
Note that the different structures offer different taxation pros and cons, so I suggest also talking with an accounting or tax professional to explore which structure will work best for you in that respect.
Register your business name.
When you form an LLC or incorporate your business in your state, registration of your name automatically happens. However, if you choose to operate as a sole proprietor and want to use a fictitious name for your company, you must register your business name by filing a Doing Business As (DBA). Don’t skip this step! It will allow you to operate your business under that name in your state and it will prevent other sole proprietors in your state from using that name.
Get the licenses and permits you need.
Depending on the type of business you’re operating and where you’re located, you may have to secure licenses and permits to legally run your business. Federal, state, county, and/or local licenses and permits might apply to you. To avoid costly penalties and fines, research which permits and licenses you need to have to legally run your business.
Part-time Doesn’t Mean You Should Approach It Half-Heartedly.
Aside from the legal considerations in starting your part-time business, keep these things in mind, as well:
Know your limits.
There are only so many hours in each day, so carefully assess your capacity to work in and on your business before jumping in.
Make sure there’s no conflict of interest or legal restrictions.
Check with your employer about any rules that would prevent you from starting and operating your type of business while still on that company’s payroll.
Take it seriously.
Although you may still be working for someone else in your other job, you’ll need to give your part-time business serious time and energy if you ever want to make it a full-time endeavor.