By Katy Macek
Quitting her full-time job to pursue her jewelry-making passion was the hardest, scariest and, ultimately, best decision Judy McNeal, founder of Madison-based magnetic jewelry company QB’s Magnetic Creations, ever made.
“You have to give your business 100% — just like I did when I worked for someone else,” McNeal says. “You have to treat it as a job, because it is.”
Treating your business’s finances the same way a corporation does is the best thing any woman with a side gig can do, says Amy Raven, a certified public accountant with Sorge CPA in Madison.
“I have watched some of my clients go from side hustles to LLCs to full-blown corporations,” she says. “It’s the most rewarding thing for me to see.”
Below, she and McNeal share their best advice on how to make your side hustle profitable.
SEPARATE YOUR INCOME
This is something McNeal says she was taught early on and does religiously, and Raven says it’s the most important piece of advice she can give.
“Mixing [your personal and business’s] money is the biggest mistake,” Raven says. “Make sure you have separate bank accounts for business and personal.”
TRACK YOUR EXPENSES
Keeping a simple Excel spreadsheet, like McNeal does, is the easiest way to do this.
Raven advises separating spreadsheets by month, putting income at the top of each and separating expenses in “buckets” by the purpose of the purchase (i.e., label the electric bill “utilities,” not “MGE.”)
“The more descriptive expenses are, the easier it is for [an] accountant to understand,” she says. “The expense should be for the purpose of the purchase, not the purchase itself.”
FILE FOR AN LLC
Filing for a Limited Liability Corporation at wdfi.org reserves your business name within the state and establishes taxation as an LLC, Raven says. You’ll still report the information as a Schedule C (if you’re the sole proprietor of your business) on your personal tax return. But LLCs can elect to be taxed differently down the road, which Raven says, depending on circumstances, could save tax dollars in the long term.
OBTAIN AN EIN
An Employer Identification number, or EIN, is a free federal ID that separates your business from your personal Social Security number for tax purposes. The application can be completed online, and Raven says this protects your personal information.
MAXIMIZE YOUR DEDUCTIONS
Two major deductions Raven sees her clients miss are tracking vehicle mileage and the use of a home office. For mileage, she suggests keeping a log of the date, purpose of the drive and miles.
If you have an area of your home, such as a second-bedroom office, dedicated exclusively for business, that can be a deduction. “There’s a couple different ways to do that,” she says. “Talk to your accountant to see which is best for you.”
FOLLOW THE LAWS
This may seem obvious, but Raven says it’s important to check local, state and federal laws. She’s seen clients overlook fees they don’t realize are taxable. She suggests checking laws specifically related to your industry, but says websites such as revenue.wi.gov, countyofdane.com (for the Madison area) and irs.gov are good places to start. It’s also a good idea to ask peers and mentors.
“Leaning on professionals who live and breathe the information contained in these websites can save someone an incredible amount of time,” she says.
BUILD YOUR A-TEAM
Both McNeal and Raven say having a successful team behind you is key — such as an accountant, attorney, financial advisor and a banker.
That way, if you specialize in creating a product, like McNeal does, you have experts in your corner helping you on the other aspects of running your business.
“Each person can bring a ‘what-if’ to the table, and another person can answer that,” Raven says.