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Starting a Business on the Side – Do Tell?

This economy has a lot of people thinking about starting a side business.  Starting a new company, freelancing, and contracting are all great ways to bring in some extra money while reducing your costs.  If you do it the right way you can see if the new business idea is really going to work while maintaining stability at your current gig.

Over the next four weeks I will talk about the various things you need to consider before launching a start-up side business or taking on a second job.

First: To Share or Not to Share

One of the first things you will need to decide is whether or not you are going to tell your employer about what you are doing.  If you decide to go the stealth route keep in mind that you probably want to keep it mum from the entire office.  Co-workers tend to talk and word will probably get back to your boss at some point unless you tell absolutely no one.

Remember to Check your Contract!

Before deciding to ‘fess up, you should also take a look at your employment contract (if you have one).  Many employment contracts limit an employee’s ability to get a second job.  Sometimes contracts require employees to jump through hoops like such as getting the employer’s written permission before taking on any other employment.  If you don’t follow the rules you expose yourself to being fired for cause.

If your contract seems limiting but you are still interested in working at a second gig and your contract discourages this you can always approach your employer and negotiate with him or her.

Once you know where you stand and how up front you are going to be, you are ready to consider the type of work you will be doing and how that work product may affect your employer.  Stay tuned for next week’s post on this issue and how to navigate it.

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Working from Home in New York City

Did anyone catch the article in the Real Estate Section of the New York Times this past Sunday about the plethora of New Yorkers who are running micro and small businesses out of their homes?  If not, definitely check it out.  Here is a link: http://www.nytimes.com/2012/08/26/realestate/running-a-home-business-in-new-york.html?emc=eta1

The article describes people around the city who are running all kinds of businesses out of their homes, from personal trainers to bakers to retailers of children’s clothes.  As the article suggests, not all of these businesses are done above board and on the books.  But there are a surprising number of ways to compromise with your neighbors. Working out of your home is a great way to save money as you start the business and can be convenient too. If you are already running a business out of your home, or thinking about starting one, I would love to hear about how it is going and what challenges and successes you are encountering.  Do you find a way to hide it from the neighbors or get them involved?  Either way it is important to recognize and acknowledge the challenges early on rather than wait for them to grow into something more serious. I really enjoyed the article and was heartened and inspired by the the incredible entrepreneurial spirit that so many New Yorkers have.

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Hiring Independent Contractors

Start-up and small businesses often begin by hiring independent contractors instead of full fledged employees.  Independent contractors can be an amazing solution to a small business working with a budget and a specific project because an employer is not responsible to pay for or withhold the independent contractor’s payroll taxes or provide benefits.  If your business is planning on hiring an independent contractor, you should be aware that there is more involved than just calling the person an independent contractor.  Businesses can get in trouble with the IRS if they call someone an independent contractor who is in fact an employee.

Although there is no exact definition of what constitutes an independent contractor, there are certain factors that the courts consider when deciding if an individual is an independent contractor or an employee.  Here are some key questions to ask to determine if the person working for you is an independent contractor:

1) Does the individual work exclusively for the company or is he permitted to work for others at the same time?  Allowing the individual to work for others suggests an independent contractor status.

2) Does the business have a written agreement with the individual stating that the individual is an independent contractor and thus the individual  must pay all taxes?  A written agreement that clearly states the terms of the arrangement is always useful.

3) Does the individual control his own work schedule and the number of hours he works for your company?  If you require the individual to work a specific number of hours a week, as opposed to hiring him to complete a project, this may suggest to the court that he is an employee of your business.

4) Does the individual operate from his own workplace and use his own supplies or does he come to an office leased by your business?  If the individual works in his own space and uses his own supplies, as opposed to your company’s space and supplies, the courts are more likely to see him as an independent contractor.

There is not a single, easy answer to whether an employee is an independent contractor or not.  Instead, you should consider your situation in its entirety.