The number of people doing gig work has increased significantly over the past few years. It was more than 76 million people in the U.S. last year, according to recent reports.
And the work can pay well. Almost 5 million freelancers are earning more than $100,000 per year, according to freelancer site Upwork. These side gigs can include everything from driving an Uber and running an Airbnb to managing websites, tutoring, or even walking a dog.
Benefits to this kind of work include flexibility, control, independence, variety, and the ability to make extra money outside a day job.
But having a successful side gig isn’t easy.
Marketing yourself and getting work is a topic for a different day. But before you get to that — and yes, you will need to — here are a few things you should know.
It’s a business
Your side gig is a business, so make sure you’re treating it like one. You are an independent contractor and the company owner.
You will need to track your costs and revenues separately from your personal life. You should probably have a separate bank account so funds aren’t intermingled.
You may need insurance. This not only gives your business credibility, but it also makes it easier for companies to hire you as an independent contractor rather than classifying you as an employee.
A proper contractor is “really someone already running their own business — they provide the service to a number of other companies,” said Sarah Holmes, a small-business attorney based in Ardmore.
It helps to set up a corporation or limited liability company, said Jeff Burke, a partner at law firm McElroy Harvey in West Chester.
“If you set up a corporation or an LLC and you’re doing a business-to-business contract, you are way more likely to pass muster,” Burke said. “A freelancer should have some written proof — business cards, advertisements, websites — that shows you’re actually out in the marketplace.”
No matter what the business, you always have to remember that “you’re the owner,” Uber and Lyft driver Joseph Casasanto told me.
“As drivers, we are independent business contractors,” he says. “So that means everything is our responsibility, like gas, oil changes, alignments, tires, repairs, miles, depreciation, etc.”
Don’t ignore the paperwork
As a business, you’ll need to make sure you’ve filed the right paperwork and take your taxes seriously. This means either reporting your income and expenses on the Schedule C to your individual tax return or setting up your business separately as an LLC, corporation, or other entity recognized for both federal and state purposes.
Because your customers don’t withhold taxes like an employer does, you’ll need to pay in estimated taxes to avoid penalties and interest for underpaying throughout the year.
Experienced freelancers, like part-time Uber driver Jason Napolitan, are scrupulous about tracking their expenses separately and keeping good tax records.
“My expenses are not only the obvious ones like gas and insurance but also tires and wear and tear on my vehicle.” he said. “For example, I always make sure to track my mileage for the IRS allowance given on my taxes.”
As a freelancer, you should have an agreement in writing that stipulates the services provided and is clear about your role, so that you’re in compliance with federal and state worker classification rules.
Guidance around independent contractor rules has been shifting, said Josh Ganz, a labor and employment attorney at Duffy North in Hatboro. But there is a baseline to follow.
Important questions to consider, he said, are: “Is your client or customer controlling your entire day? Do they tell you where to be and provide the tools for you?”
Set boundaries
Having a side gig should never affect your primary job. Make sure you have clear boundaries and there are no conflicts so you don’t get into trouble with your primary employer.
Running a side gig means you’ll have a lot to juggle between your personal life, your job, and your business. So it’s important to create a schedule. Your customers will want to know when you’re available and so will your family.
It’s important to set goals as to how much you want to earn and stick to those parameters. It’s easy to get caught up in doing the extra work but it can also quickly take up your time.
“If you want to do this full time, you have to set goals,” Lyft driver Kendra Brigman said. “You have to have a good attitude when you’re doing your side gig and provide great service. But your availability is also very important.”
Be smart about pricing
If you’re doing freelance work for an established company like Uber or Lyft, those rates are usually set for you. Others, like Airbnb, can suggest rates based on your local market. But the rest will be up to you.
Setting a price too low may set a precedent that becomes unprofitable over the long term. Charging too much may turn off potential customers. You’ll need to research the competition and make a few mistakes over time to learn the right balance.
It’s also important to know your limitations.
For example, Airbnb host Julie Seda said, “We are always up-front to prospective guests that our house is not suitable for people with mobility restraints.”
Lyft driver Brigman said knowing your pricing and comparing it with what you’re being asked to do can make a big difference, and it’s important to figure out what’s worth your time.
“Sometimes the miles requested doesn’t equate with the amount of money I would like to earn,” she said. “I’ve learned to turn down those jobs.”
