You’re selling handmade crafts on weekends. Offering social media help to a friend’s business. Doing a little consulting between jobs. It’s not your full-time thing – it’s just a side gig.
But here’s the truth most people don’t learn until it’s too late: lawsuits don’t care if your business is full-time or part-time. If you’re offering goods or services, collecting money, and operating without legal protection, you can be sued – personally.
Let’s break down why even a tiny side hustle can carry serious legal risks – and what you can do to protect yourself.
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Side Gig ≠ No Liability
A common myth goes like this: “I’m just doing this on the side, so no one would sue me. It’s too small to matter.” That’s wishful thinking.
In reality, once you begin charging for a service or selling a product, you’re stepping into business territory – and with that comes real-world consequences.
Here are some real scenarios:
- A client accuses you of giving bad advice that hurt their business.
- A handmade product causes an allergic reaction or injury.
- A customer claims you missed a deadline or violated your contract.
- You unknowingly infringe on someone’s copyrighted content.
None of these depend on whether you consider yourself a “real” business. The court doesn’t care. If someone believes you caused harm, they can take you to court – and go after your personal assets.
What Happens If You’re Sued as a Sole Proprietor?
If you haven’t formed a legal business entity (like an LLC), then by default, you’re operating as a sole proprietor. That means:
- There is no legal separation between you and your business.
- Your personal assets are on the line – bank accounts, car, even your house.
- You are fully responsible for any debts, contracts, or legal claims.
And no, saying “but it was just a side gig!” won’t protect you in court.
But I Only Made a Few Hundred Bucks…
Income has nothing to do with liability. You can get sued whether you earned $100 or $100,000.
Let’s say you design a logo for someone and they later get into a legal dispute over trademark issues. Even if you only charged $200, you might still get dragged into the conflict. If they decide to sue, your legal costs could dwarf whatever you earned.
The size of your hustle doesn’t determine your exposure – your structure does.
How an LLC Can Shield You From Personal Risk
This is where a Limited Liability Company (LLC) can be a game changer. When you form an LLC:
- You create a separate legal entity – one that’s distinct from you personally.
- Your personal assets are generally protected if the business is sued.
- You look more credible and professional to clients and platforms.
- You gain access to business banking, credit, and tax deductions.
As long as you treat the LLC properly – keep finances separate, maintain good records, and follow basic rules – you gain a legal shield between your business risks and your personal life.
What Kind of Gigs Should Consider an LLC?
You don’t need to be making six figures to justify forming an LLC. In fact, you probably should consider one if:
- You’re doing client work (freelance writing, coaching, design, etc.)
- You’re selling physical products
- You’re monetizing digital goods (courses, eBooks, templates)
- You’re making money from affiliate marketing or ad revenue
- You’re using online platforms that issue 1099-Ks or ask for business details
If money is changing hands and your name is on the line, it’s worth protecting.
You Don’t Need to Be Big – You Just Need to Be Smart
Some of the worst legal messes happen to people who think they’re too small to matter. That mindset leads to inaction, which leads to exposure.
Think of forming an LLC like putting on a seatbelt. You don’t expect to crash every time you drive – but if something happens, you’ll be glad it’s there.
And unlike big corporations, your setup doesn’t need to be complex or expensive. Filing an LLC is often quick, affordable, and gives you immediate peace of mind.
The Bottom Line
Just because something is “on the side” doesn’t mean it’s outside the law. If you’re accepting payments, producing goods, or working with clients – even casually – you’re exposed to real risks.
But you don’t have to operate in fear. With the right structure, you can keep doing what you love, earn extra income, and rest easy knowing your personal life is protected from your professional one.
Side hustle or not, you owe it to yourself to take the simple step of getting structured. The next time someone says, “It’s just a side gig,” you’ll know better – and you’ll be ready.
