How to Start a Side Business

First of all, let’s distinguish between a small business and a side business. People often misunderstand the nature of the two ventures. A small business generally requires a high level of commitment and substantial initial investment. It is also viewed as a major source of essential income. On the other hand, a side business is usually something someone does in her spare time to earn extra income in addition to her normal salary. Side businesses are often a creative outlet for active people to engage in something they are passionate about and make a profit at the same time.

Getting Started

Start with an interest inventory. Most of us have a hobby we like to pursue during our leisure time. Make a list of hobbies and determine which ones could potentially fill a need for other like-minded enthusiasts. For example, I enjoy making woodworking gifts using my scroll saw. Before I can make a gift or project, I usually develop my own woodworking plan or pattern to follow in the construction of the piece. One day I had the idea to market some of my original patterns as a downloadable e-book for other scroll saw artists to enjoy. Pattern making has turned into a steady, lucrative side business that I enjoy in my spare time. It’s not a business, because I only do it when I feel like it, and not out of obligation for sales. Some people enjoy helping others or working with their hands. Something like a handyman business or a pet-sitting service may be a great side endeavor. The freedom to solicit or accept business only when desired makes services an ideal side business to pursue. They can also help gauge the potential of success for future small business opportunities should the thought arise.

Determine requirements. Depending on the nature of the business, there may be certain local or state requirements that must be met before starting. For instance, a handyman may need to obtain permits before beginning a particular project. Personal financial planners may be required to obtain a license or certification before advising clients on monetary matters. Pet or house sitters should have adequate liability insurance before entering a client’s home. Operating within legal, moral and ethical business practices will build credibility and trust within the community.

Keep it to yourself. While having a successful side business can be exhilarating and a much-needed escape from the rat race, it can present some challenges. One is the desire to broadcast the newfound success to co-workers. At first, many may offer compliments, but eventually someone will point out deficiencies at work and begin to attribute them to divided attention or loyalty. Mentioning a side business is okay, but don’t fall into the trap of consistently raving about it at work unless a steady paycheck is not that important!

Remember to pay your taxes. Taxes can be a sore subject for anyone, but they have to be paid in order to avoid serious consequences. Accepting payment for goods and services “under the table” may be tempting, but it is not the legal way of conducting business. Small, infrequent income may go unnoticed or overlooked by the Internal Revenue Service, but a regular sizable income will eventually come under scrutiny. This can often happen when a customer tries to write off an expense or service performed by the side business owner on his taxes. It is important to keep track of sales and expenses and to report all earned income to the IRS. Failure to do so could result in possible fines or hefty back-tax liabilities.

Keep good records. Always keep accurate records of all business transactions, contracts, business expenses and proof of licensing in case of legal liabilities or civil complaints. A good record keeping system can be a true lifesaver in the event of any claims brought against the side business owner. Though a side business does not operate with the same level of commitment as a regular small business, it is nevertheless a business, and it must be treated as such for the safety of the owner and customer.


  • Turn your hobby into a side business for extra cash. Contact state and local officials for specific business requirements.


  • Side businesses may be subject to licensing and certifications for certain services to avoid legal ramifications.