The allure of the side hustle is stronger than ever. It’s a fantastic way to pursue a passion, build a brand, and earn extra income. But in the excitement of launching your new venture, it’s easy to overlook the web of local rules and regulations that govern commerce. What starts as a simple way to make money can quickly land you in hot water with your city or county. Before you scale up, it’s crucial to be aware of the common situations where your side hustle might break local laws, saving you from fines, shutdowns, and legal headaches down the road.
Selling Homemade Food Without a Permit
Your neighbors might rave about your homemade cookies or barbecue sauce but selling them is another story. Most jurisdictions, including many in Georgia, have “cottage food laws” that regulate the sale of food made in a home kitchen. These laws often restrict what you can sell (e.g., no meat or dairy that requires refrigeration) and may require you to obtain a permit, undergo a kitchen inspection, and follow specific labeling rules. Selling food without adhering to these health and safety regulations is a serious violation.
Running a Business from Home in a Zoned Area
Zoning ordinances are local rules that dictate how property can be used. Running a business from your home in a residential-only zone can be illegal. While a quiet, home-office-based business is usually fine, a side hustle that involves customers visiting your home (like a hair salon or tutoring service), excessive deliveries, or outdoor signage can violate these ordinances. It’s essential to check your local zoning codes before you start inviting clients over.
Operating a Rideshare Service Without Proper Insurance
Driving for a rideshare or delivery app seems straightforward, but it comes with specific legal requirements. Your standard personal auto insurance policy typically does not cover commercial activities. If you get into an accident while working, your claim could be denied, leaving you personally liable for damages. You must have the proper commercial or rideshare-specific insurance coverage required by your state and local authorities to operate legally.
Offering Pet-Sitting Services Unlicensed
Turning your love for animals into a dog-walking or pet-sitting business is a popular side gig. However, many cities and states require professional pet-sitters to be licensed and insured. Operating without a business license or liability insurance could result in fines. Furthermore, should an animal get injured or cause damage under your care, you could face significant legal and financial consequences without the proper protections in place.
Forgetting to Collect and Remit Sales Tax
If your side hustle involves selling tangible goods, you are likely required to collect sales tax from your customers. This applies to online craft stores, flea market booths, and direct sales. You need to register with your state’s department of revenue, get a seller’s permit, and then collect and remit the appropriate state and local sales tax. Failing to do so is a common way a side hustle might break local laws and can lead to back taxes, penalties, and interest.
Using Copyrighted Material for Your Crafts or Designs
Creating and selling t-shirts, mugs, or art prints featuring popular characters, logos, or song lyrics is a direct infringement of copyright and trademark laws. Just because you can find an image on the internet doesn’t mean it’s free to use for commercial purposes. Companies are highly protective of their intellectual property and will not hesitate to send a cease-and-desist letter or sue for damages, shutting your business down overnight.
Misclassifying Yourself as a Hobbyist Instead of a Business
There’s a fine line between a hobby and a business, and the IRS has clear rules about it. If you pursue an activity with the intent to make a profit, it’s a business. Misclassifying your side hustle as a hobby to avoid paying income or self-employment taxes is illegal. The IRS considers factors like whether you operate in a businesslike manner and the time you devote to the activity to determine its status.
Turning a Blind Eye to a Rule Can Shut Your Hustle Down
A successful side hustle requires more than just a great idea; it demands due diligence. Taking the time to research local ordinances, obtain the right permits, and understand your tax obligations is not just red tape—it’s the foundation of a sustainable business. By ensuring your venture is fully compliant from the start, you protect your investment, your reputation, and your ability to grow without fear of being shut down.
What legal hurdle did you not expect when starting your side hustle?
Read more:
8 Signs Your Side Hustle Is a Failure and It’s Time to Leave It Behind
8 Side Hustles Millennials Are Turning Into Careers
The post 7 Times Your Side Hustle Might Break Local Laws appeared first on Budget and the Bees.
