Taking Advantage of the Gig Economy

With the rise of the “gig economy”, many are finding flexibility by creating full-time work out of multiple jobs and consulting on various projects. To start a consulting business in California, you’ll need to consider several legal issues, including the best type of legal entity, necessary licenses and permits, tax issues, and adequate insurance.

Legal entity: The choice of an appropriate business entity is critical. At a minimum, you’ll want to choose a legal form that protects you from personal liability. For example, you may decide to register with the state as limited liability company (“LLC”), which creates a separate legal entity (your business). Running a company as a sole proprietorship is the easiest way to start a business in California and does not require filing with the California Secretary of State, but it means the owner is still liable for debts and has no separate legal protection.if_104_1117290

Licenses and permits: Once you determine which entity suits your business best, you’ll need to register to do business in California. At a minimum, you’ll need an Employer Identification Number (“EIN”) and likely a fictitious business name or statement “doing business as” (“DBA”). California’s “CalGold” website provides a searchable database of necessary permits for your business. On a local level, cities and counties may also require you file a business license and pay annual fees to operate your business.

Tax filings: Depending on the legal entity you have chosen, you may need to attach a separate schedule to your annual tax filing. You will also use a tax form that may be unfamiliar: the IRS 1099-MISC. You may have to make income tax payments with a new frequency, including the federal self-employment tax. If you run your consulting business from home, you may be able to deduct certain expenses from your annual tax filing.

Insurance: Finally, you’ll want to secure appropriate insurance for the type of consulting work you plan to do. Additionally, if you are a professional, you may need certain types of malpractice insurance. You’ll also want coverage for your equipment in case it is damaged or stolen. Further, if you plan to work in the field or outside of your home in a capacity that has a risk for injury, you’ll want personal injury insurance for yourself and others, as well as adequate vehicle insurance.

To discuss how to make the gig economy work for you, contact the experienced business lawyers at Dennis Law Group today.