Broaden your gig

Turning your side hustle into a full-fledged business

In 2017, Courtney Lynn Ottrix started blogging about things to do in Cleveland. It offered occasional opportunities for income.

But two years later, when her full-time position was eliminated, Ottrix found herself self-employed.

“I had started to see what could be of my business if I gave it my all,” Ottrix says.

Whether you’re pushed into it like Ottrix or have time to make a plan, following these steps can help you transition your business from a side hustle to self-employment.

1 Separate your business and personal finances Ottrix started as an independent contractor. But as she began working with larger brands and bringing in more revenue, she chose a business structure, filed for an employer identification number and opened a business bank account.

Separating your business and personal finances is a key step on the way to formalizing your business, says Keith Hall, president and CEO of the National Association for the Self-Employed.

Creating a business entity and filing for an EIN is necessary before you can apply for grants and loans or make wholesale purchases, adds Lewis Weil, founder of Austin, Texas-based financial planning company Money Positive.

2 Formalize your business plan If you’re already freelancing, you probably have a good sense of how much you can earn per item or per client, Hall says. But you may not have a formal business plan that translates those numbers into enough money to make a living.

Weil recommends new business owners aim to pay themselves twice as much as they need for monthly obligations like rent or mortgage payments, food and utilities. On top of that, you’ll need enough revenue to cover business expenses and taxes. About 30% of your revenue after expenses should be set aside for quarterly tax payments, Weil says.

3 Prepare your personal finances If you have time to plan for a transition, prepare your personal finances by building up your personal emergency fund and paying down high-interest debt, like credit cards. If you get health insurance from your employer, research the cost of COBRA or a health insurance marketplace plan.

If you’re earning money from a side business, Weil recommends letting it pile up in your business bank account. He encourages saving enough to pay yourself for three to six months before relying solely on your business for your income.