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If you’re finding you have extra time on your hands, it could be the perfect time to start up your own side hustle. Or maybe there’s a project you’ve had in the works for a while now, and you’re looking to get serious about building it into an alternative stream of income.
Starting your own business on the side is a great way to do what you love and get paid for it. But in the midst of all this planning, it’s important to get your head around your legal situation.
Thinking about your legal obligations when you’re starting your own business can seem pretty daunting, so we’ve put together the key legal obligations you need to be aware of when turning a side hustle into a fully fledged business.
In this article, we outline some common examples of businesses you can start as a side hustle, and what legals you need to be thinking about if you’re interested in any of these models.
Plus, later in the article, we’ll explain what to do if you’re starting up a side hustle while still employed by someone else. This is important information as you don’t want to violate your current employment contract by starting a new business on the side.
Your Legal Obligations When Starting A Side Hustle
When you’re starting or growing your side hustle, it’s important to understand where you stand legally.
The first thing you need to do is register for an Australian Business Number (ABN).
Having an ABN in place essentially means you identify as a sole trader or an independent contractor. You can learn more and register here.
Once your ABN is set up, you’re in a position to engage in commercial activity.
But, after setting up your ABN, there are still a few things you should be thinking about:
- What are your income tax options?
- Will you need to make voluntary contributions to your super fund?
- Do you need to think about insurance?
- How will your invoices work?
If you’re not sure of how to set up as a contractor, we’ve put together a useful checklist for you here.
On top of setting up your business, you’ll need to make sure you’re protected legally in your relationships with your customers.
Generally, the first step is making sure you have the right contract in place between you and your customers or clients. Whenever you engage with customers, having an agreement between you helps manage expectations, ensures timely payments and avoids unnecessary disputes.
There are various types of contracts, and the type you use will depend on the kind of work you’re doing and how you engage with your clients and customers.
Now, we’ll walk through some examples of common ‘side hustles’, outlining the contracts you’ll need in place if these are areas you want to build a business in.
So, let’s dive into these key legal things you should be thinking about when building up your side hustle.
Working As A Freelancer: The Legals You’ll Need
Working in the freelancing space is a great way to develop a new skill and generate some income from it — all while living flexibly and maintaining a work-life balance.
Typically, you’ll be engaging various clients who require your freelancing skills. So, it’s important you have a contract with each of these clients to make sure that everything is clear. Often, this contract is called a Freelancer Agreement.
Generally, a Freelancer Agreement will clarify:
- Scope of services: What services will you provide? What exactly is included, and what isn’t?
- Liability protections: Who is responsible if something goes wrong?
- Intellectual property ownership: If you’re creating work for someone, who will own that intellectual property after the project is complete?
- Payment: How will payment work? What happens if payment is late?
Having all of these details set out in writing can make sure that you and your customers are on the same page about what you’ve agreed to. It can also save you from miscommunication issues and disputes down the track.
Even if you think you have a great relationship with a client, having a clear contract in place can save you from headaches later if something were to go wrong. Also, your Freelancer Agreement can be reused from client to client, and clauses can be adjusted if there are specific things you want to address.
If you want to learn more about why having a contract is important for freelancers, we’ve written about it here.
Offering Marketing Services: The Legals You’ll Need
If you’re thinking of starting a side hustle that’s a little bit more specific, it’s important that you have a customised contract in place to reflect the unique nature of your services.
For example, it is quite common for independent contractors to provide a suite of marketing services to clients — from graphic design to copywriting, strategy consulting, SEO and lead generation.
To help your clients build their brand, you often get deeply involved in their business — having access to their website, database, marketing materials and more.
In this case, it’s important to make sure that both you and client have certainty around your services:
- What are you promising to deliver?
- Do you have any KPIs?
- How can you guarantee that you will protect your clients’ confidentiality?
To get real certainty around these points, you’ll need to capture them in a legal document.
This is where a Marketing Services Agreement comes in.
A Marketing Service Agreement is a contract between you and your client that sets out the marketing services you will be performing for them.
So, why do you even need a Marketing Service Agreement? There are a few reasons, including:
- To ensure you’re on the same page about your services: A well-drafted Marketing Services Agreement will clarify the key KPIs and deliverables you’re working on for the client, eliminating the chance of disputes in the future. The agreement will also provide certainty around payment terms, timelines and more.
- To clarify intellectual property ownership: When you’re creating work for your clients, they will want to own that intellectual property after the project is complete. But you might want to keep some rights, too — especially if you want to show off your work in a portfolio to attract future clients.
- Confidentiality: If you’re accessing clients’ sensitive business information as part of your services, confidentiality provisions in your Marketing Services Agreement will give your clients confidence that you’re using their information appropriately.
Becoming An Influencer: The Legals You’ll Need
Have your social accounts been taking off lately? Or perhaps you’re still in the early stages of building up your profile in the hopes of securing brand deals later down the track.
In any case, when you’re trying to raise your profile as an online influencer, great content isn’t all you should be thinking about. It’s just as important to have your legals sorted out from the start.
Not only does this demonstrate to your early collaborators that you’re professional and taking your business seriously, but it can also protect you from deals gone wrong.
An Influencer Agreement is useful here because it clearly outlines your relationship with a brand, what they expect of you, and what you can expect from them. It also addresses other important things like payment, how long your relationship with the brand will last, and under what circumstances they can terminate the deal.
Influencer Agreements are typically given out by the business rather than the influencer. But it’s also a good idea to have your own in place if you wish to provide it to brands you’re working with.
And, if you’ve been given an Influencer Agreement by a brand and you’re unsure whether it protects you, our lawyers can review it for you (and potentially redraft the contract if it could be made more favourable to you).
Can I Start A Side Hustle If I’m Still Employed By Someone Else?
Starting a side business while you’re currently working for another company makes sense in a lot of ways. The steady income you’re earning from your regular job can support your business in its early stages, taking heaps of pressure off you. And, if things don’t work out with your side hustle, you’ll always have that job to fall back on.
While this is a smart strategy, it can be trickier from a legal perspective. Starting a side hustle could violate clauses in your employment contract, such as restraints of trade or confidentiality clauses that may limit the work that you do outside of your employment.
This might cause problems with your employer, leading to anything from awkward conversations to potential disputes with a breach of your employment contract.
If your side hustle is related to the work you do under your employment contract, you need to make sure you check whether your contract may affect the way you run your side business.
Whether you’re carrying over any clients from your workplace to your side hustle, or using the same intellectual property you’ve used in your workplace for your side hustle, it’s a good idea to have a lawyer look over your employment contract for any legal issues.
In any case, it would be a good idea to have the conversation with your employer about your side hustle so that you can get their consent in writing and avoid any misunderstandings later.
Need Help?
No matter what stage you’re at with your side hustle – whether it’s still in its early stages or it’s becoming a sizable business – our lawyers are here to help.
Get in touch and we’ll ensure you have the legals necessary to protect you now and as your business grows. Our legal consultants are available for a free, no-obligations chat on 1800 730 617 or via team@sprintlaw.com.au.
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