Side Hustle Series: The $50 CEO
Well I'm now in my 5th month of "retirement" (I'll stop putting that word in quotes eventually, it just sounds so....final but I'm actually just starting my new life) and things have been going pretty well on that front. With fairly minimal effort I've now got 3 paid jobs under my belt, one was a 1 month long consulting job, the second was sourcing an HR contractor for a company that reached out (I know nothing about HR so couldn't do it myself) and receive commission every month for that, and just yesterday I did an advisory call for 1 hour to give my opinions on the industry I used to work in. All fairly simple stuff and aligned to what I know so a nice little side hustle and a bit of extra income to pay for the renovations that are still dragging on.
So long may it continue, doing a little bit here and there to pay for little extras or sandbag the retirement budget.
One of my greatest fears in life is falling foul of the tax man and I'm one of few people I know who actually like paying tax. In a country like South Africa where the "Haves" are a minority compared to the "Have Nots", I feel the more fortunate people like me who happens to find themself in the have camp, have a duty to pay their dues correctly and fairly so the country can hopefully, use those taxes to reduce the number of Have Nots and right the balance , which in turn will build the economy from which everyone benefits. I think that's called socialism or liberalism or one the isms, I prefer just to think of it as doing the right thing.
So with that phobia in mind, as the newly generated cash from my side-hustle adventures started to come in I started to worry about three things:
It's going to be super complicated accounting for all this correctly in my tax returns, especially as some of the income is coming from abroad
I need to be careful that I don't spend the money and I put some aside for the tax man next year. But how much? I have no idea how much I'm going to earn now going forward.
Am I legal? How much do I have to earn before I have to become a business? register for VAT? do I need an accountant? What expenses can I claim and what is and isn't allowed? What are my liabilities, can someone sue me for everything because I'm acting as a freelance contractor?
For me this is all made even more confusing by the fact I'm a British expat and after 6 years I don't really understand the rules around tax and business ownership in South Africa and compared to the UK, everything here is really really complicated and everything involves tons of forms. You're kind of expected to know so much stuff.
I was starting to feel a little bit of that stress coming back that I walked away from in April when I quit my full time job. I hate that feeling, I never even realised it existed until after I retired but I can spot it a mile off now and it's not a friend I intend to have around. it is time to get a grip.
So get a grip I did!
I decided to make the whole thing formal and set up a business so that I could separate my life savings which we live off from the side hustle income that is great but is totally unpredictable.
As one of my pet hates in life is form filling, I decided to use a third-party company to set-up the business. I found a company online called Govchain who made the hole process as easy as falling off a log. I paid them R899 / $50 / £40 and filled in a few online forms and uploaded a few ID documents and after a little over a week, I got sent all of my business documents and confirmation I was now a director of my own company, how easy was that!
Then I took all of those documents and sent them to my bank and politely asked:
"Please sir? Could I have a business bank account sir?"
And low and behold, they obliged and within another week I had a business cheque account, a business savings account and a fancy company debit card with my company name on it. This is nowhere near as complicated as I thought it was going to be.
Instant Managing Director, just add water
So I'm now the Managing Director ( I could have gone with CEO but it just sounds too grand for a side hustle) of a company who can do work and send invoices and get paid and all of that good stuff. Next step was to make sure I know what my responsibilities are as an owner and Managing Director of a PTY Limited company. After a bit of scratching around on government websites, I discovered I needed to produce an annual financial statement and a few other bits.
That is when the dread started to come back and I started sweating about going to jail because I forget to submit something on time to the tax man. Easy to fix though, I went online and googled for "Online Accountant South Africa Pay Monthly" and guess what? The top result was a new company called Osidon who offer a full accounting service for small businesses and startups for £899 / $50 / £40 per month. That my friends, is a bargain for a good night's sleep. A little over a week later my new accountant phoned me for a quick chat and to explain how it was going to work, he was basically going to do everything tax man, government and financially related for me, woohoo!
He gave me a XERO account (Which is the leading accountancy software) and told me to link my business bank accounts so it automatically tracks the money flowing in and out of the business and all I need to really do is reconcile the transactions every month by confirming what they are e.g. travel, paid invoices, IT equipment etc. and he'd do the rest. I like this guy, he's my kind of people!
/ £40 per month so far.
Now don't get me wrong, this is not me going back to work, no siree that ship has sailed. This just means that every time I do a bit of side hustling for a few sheckles, I can invoice it from my company, the money goes into the company bank account and the accountant makes sure it's legal above board and the right amount of tax is paid. It also means there's no confusion when I, for instance, take an Uber to go for a night out versus taking an Uber to go see a client. One is a personal expense, the other is a business expense. One is tax deductible in the business, the other one is not.
So I decided to right a small series on Tribal Fi about what I learn about being a small business owner and for anyone doing a side hustle, what the advantages and disadvantages of being a business owner versus being a freelance contractor. Hopefully then, if you find yourself in the same position, you can avoid the mistakes and blunders that I expect are coming my way in the next 12 months.
My next step is to try and get an understanding of what the tax implications are e.g. if my business makes money and has to pay tax on it and then I pay myself from the business and I have to pay tax on that, am I just paying even more tax than before? Surely not or why would anyone start a business?
This question and many more will be answered in future instalments of the Tribal Fi Side Hustle Series so if you haven't already hit subscribe at the top of the page and we'll let you know what we find out.
Untilt then, keep living.