How much does it cost to start a side gig?


So you're thinking to start a side gig. Congratulations! Whether you are trying to pay off debt or just trying to fully fund your savings account, a side gig can help you reach your financial goals.

But be aware: There is a grain of truth to the old adage, “You have to spend money to make money.” Exactly how much money are we talking?

The cost of starting a side gig depends on several factors, so let's explore some of the costs you are likely to encounter regardless of your new business focus.

Cost 1: Starting an LLC

[Disclaimer: I am not an attorney or tax professional. Investigate before deciding what's right for you!]

For most businesses, it pays to start an LLC (though, depending on the nature of your side gig, another type of corporate structure may be beneficial or even necessary). Why? It's actually right there in the name: “LLC” stands for “Limited Liability Company.”

If you route your business expenses and income through an LLC, it separates your business from your personal assets. This means that, if something bad happens (like getting sued), your personal bank accounts, home, etc., aren't at risk. If you don't have an LLC, then you are generally categorized as a sole proprietor, which means everything you (and maybe your spouse) have is potentially on the line if something were to go wrong.

How much does it cost?

If you're into self-sufficiency, you may be able to figure out how to file the paperwork on your own. On the high end, you could hire an attorney — and if you need something really specific, you might have to do that.

There are also legal service companies that can walk you through the process. Assuming you go this route, you can expect to pay $150 plus any state filing and related fees. Let's call this $200.

Cost 2: Opening a bank account

Once you've started an LLC and applied for an EIN (employer identification number) from the IRS, you're ready to open a business checking and savings account. Skipping this step defeats the whole purpose of applying for an LLC in the first place, so make sure you do it!

How much does it cost?

That all depends on where you decide to open an account. I debated between a bank and a credit union and, in the end, chose a local credit union with a $100 minimum balance checking account, no minimum requirement savings account, and no monthly fees. Your mileage may vary, depending on what you want to do. Although my savings account doesn't have a minimum balance requirement, I did need to put at least $5 in at the time of opening.

My cost: $105

Cost 3: A web domain, site design, and hosting

Like the other costs, this can vary widely depending on how fancy you need (or want) it to be. It's a good idea to at least buy a domain as soon as possible in case you need it. Domains can cost as little as 99 cents but can go into the hundreds or even thousands of dollars.

Simply owning a domain is only the first step. For your site to appear on the web, you need hosting. On the low end, this costs about $4 per month. Typically, you commit to a year or two of hosting and can pay as a lump sum.

Next, you need a site design. This is also on a sliding scale depending on what features you choose. There are bundles that allow you to easily customize basic sites, or you can have someone design one from scratch. On the low end, $6 per month.

How much does it cost?

Let's call this $10 (domain) + $48 (one year's hosting) + $72 (one year's site design) = $130

Cost 4: Varies by product/service

Additional costs vary by the product or service you'll be offering. Do you need to buy raw materials? Are you expecting to hire out tasks like t-shirt screening? Is a special license or certification needed to operate your new business legally? These all impact your bottom line, and should really be addressed in a business plan to make sure you will operate at a profit — but that's a totally different subject for another day!

Total

If you go with the minimum costs above and don't need anything else, by my estimate, you're looking at a cost of at least $435. It's pretty likely your actual costs will be, but I think that depends more on what you are doing.

Have you started a side gig? What was your initial outlay, and what did you spend it on exactly?

More about...Planning, Side Hustles

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Beth
Beth
5 years ago

Good points! One thing I would add: put some money into your web content too! Design isn’t going to do you a whole lot of good if your content isn’t well written, persuasive and correct. (Not to mention optimized for SEO and other digital writing best practices). And yes, they teach this stuff in colleges — hiring a student may be a good way to give him or her experience while keeping costs low. One surprise that hit me when I started up a freelance business is that some clients won’t work with you unless you’re “official” (in Ontario, that… Read more »

Honey Smith
Honey Smith
5 years ago
Reply to  Beth

An LLC and an EIN is probably the equivalent of “official” here. If you’re operating as a sole proprietor, your EIN is your SSN, I believe.

If your side gig will revolve around your website, spending more may be a good idea. If you just need a site to exist so there’s proof you exist, it may be less necessary.

AMW
AMW
5 years ago

Depending on the business, you may also need some marketing tools like business cards or brochures….and treat it like a business, that tax benefits are wonderful.

Honey Smith
Honey Smith
5 years ago
Reply to  AMW

Anything printed seems a little old-fashioned and unnecessary to me, but it would depend (a LOT) on your industry and target audience. For me, this wouldn’t be a start-up cost, but a “wait and see if this would be beneficial and invest down the line after I’ve made some money and am in an expansion phase” type cost 🙂

Brett
Brett
5 years ago

Any particular recommendations on the legal services companies that would be less than a lawyer but possibly better than doing it yourself? The only one I know of is legalzoom, but I didn’t know if you were talking about a given type of company or had some nationwide names of places that I could look into. Also on the LLC, what type of yearly filings are there above a sole proprietorship and are these something that would require (or suggest) professional assistance with? I really appreciate the article. Been thinking about side-gig consulting for some time now but starting it… Read more »

Honey Smith
Honey Smith
5 years ago
Reply to  Brett

Legalzoom is the main one, I’m sure there are others. My husband’s an attorney so he did mine for free and I only paid filing fees 😉

Whether there are ongoing costs depends on the state the LLC is formed in. Requirements may vary.

Ali @ Anything You Want
Ali @ Anything You Want
5 years ago

When I started my blog, I spent about $50 setting up the site and hosting. So far, that is all I’ve spent. I’ve told myself that I will do everything myself until I start to generate some income from the blog, at which time I might invest in some key support like programs to help with social media. It was very interesting for me to set up my blog because I never realized how much you can actually spend on a blog! I always thought you just write for free. There are so many add ons and services. You really… Read more »

Melissa
Melissa
5 years ago

I still need to start an LLC, but I definitely agree about getting a bank account and, if you want, a business credit card. If only for the ability to keep your expenses completely separate from your regular finances – this will make it easier for you at tax time!

Daniel
Daniel
5 years ago

I’m about to do my next side gig and do all of the steps you outline above, so this was timely. However a side gig _can_ be had for cheaper or even free, and I think there is merit to bootstrapping a side gig business. Two examples: My brother cleans parking lots for a few commercial buildings twice a month for $300 using a blower he already had. Tax time, he just files it as income under his name with no LLC. By word of mouth, he also does some handyman projects for another ~$200/mo A $500/mo income for zero… Read more »

Honey Smith
Honey Smith
5 years ago
Reply to  Daniel

A website might not be necessary for everyone, but an LLC and business banking/checking in the LLC’s name is very important.

Free comes at a cost if you are sued and lose everything. For how cheap it is, the protection the LLC buys is well worth it.

Mike @ Tip Yourself
Mike @ Tip Yourself
5 years ago

It’s absolutely incredible how much free content and services are available. Whether it’s learning to do basic coding or marketing related skills, there’s just so much available these days.

As other folks have said, the key is to be intentional with what you want to do. Based on your priorities and goals you can best determine a budget and what is or is not worth spending some money on vs a pure DIY approach.

Mr. Utopia @ Personal Finance Utopia
Mr. Utopia @ Personal Finance Utopia
5 years ago

The start up costs for a side gig are really dependent upon what the business actually is. Also, you don’t always have to incur them all up front. For example, if you start your own blog, you likely do not need to form an entity such as an LLC until sometime down the road.

Honey Smith
Honey Smith
5 years ago

I think for a blog (even one that doesn’t make money right away) an LLC is ESPECIALLY important. Presumably you are giving some sort of advice/making recommendations, and that has the potential to go really, really awry…

Steve @ savedandfocused
Steve @ savedandfocused
5 years ago
Reply to  Honey Smith

This sounds like another good post for Get Rich Slowly. I bet most bloggers never think twice about forming an LLC. I’m curious as to all the problems not having an LLC for a blog could cause.

Jan
Jan
5 years ago

Setting up a LLC is important I feel. Depending on your country (in some countries it can be quite expensive). It will give you the confidence to experiment and also keeps your business and personal affairs in order.

Michelle
Michelle
5 years ago

When I first started my business as a side gig, it was very cheap to start. I started on a free platform (which I now regret – WordPress all the way!), created my own design, and more.

Kurt Riddlesperger
Kurt Riddlesperger
5 years ago

This year I started up Evil Cowboy Hot Sauce bottling my grandfather’s cooking sauce with my brother. The LLC was the easiest part to set up but costs do add up. I got a few DBAs which were $25 each one of which I may never use. You can use a DBA to open a free business checking account and have it listed on your checks($50). Just make sure it’s the dba you plan to use… Tax was interesting learning what needs to be filed for sales tax and franchise tax. I also bought a few website domains which may… Read more »

Michael Riddell
Michael Riddell
5 years ago

One other note to add about forming an entity is that there are annual minimum franchise taxes which you must pay ($800 in California). That catches many by surprise since Legal Zoom doesn’t see fit to warn customers about that.

Gretchen
Gretchen
5 years ago

As far as LLC’s go, the cost is very much dependent on where you incorporate. In New York State, you are required to publish a notice. This can get very expensive. If you fail to do it, your LLC is invalid. Anyone thinking of starting an LLC should read up on the local process at their state’s Secretary of State (or similar) website.

The Scientist
The Scientist
5 years ago

Wow this is a great article, I am actually launching my site on Monday. I love to write about science and this post definitely gave me some motivation to continue because lord knows I need the little extra cash. Thanks for the post!

Bryan@Just One More Year
[email protected] One More Year
5 years ago

We started a side gig years ago with rental real estate. We created this as partnership originally, morphed to a LLC, and now an S-Corp. The initial cost to form this business and open a checking account was less than a $100. The real cost for real estate begin when we purchased properties. Fortunately, we were able to 100% finance the first home with no out of pocket money. This included some minor repair work that we completed ourselves. The only way we were able to do this with no cash out of pocket was with excellent credit, a private… Read more »

Fred
Fred
5 years ago

In the state of California, not only do you have fees to create an LLC, but you also have to pay a minimum tax of $800. That means you have to pay $800 even if you don’t make any money or even if you lose money. Getting an LLC in another state doesn’t help if you are operating out of California. So you are out around $1,000 right off the bat. The biggest problem I’ve seen with people wanting to start their own business is that they spend a huge amount of money up front before they even know they… Read more »

Edward Gate
Edward Gate
5 years ago

Interesting.This is the advice that the most successful side businesses have little cost to set up, scale easy and are based on passion and creativity, is most salient. This is the article people should read before entering into the business.

mark
mark
5 years ago

I disagree about the LLC being necessary. It depends on the business. If you’re a personal trainer, for example, then yeah – you could physically mame someone with your bad advice. But if you are, for example, doing small websites or graphic design and are not a bonehead (i.e., not ripping off others’ images, etc.) then it’s best to just stick to a sole proprietorship, IMO.

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