Gig Workers: It’s Time to Legitimize
As Aspira-USA consultants and trainers, we are often asked to assist freelancers or sole proprietors who are part of the “gig” or underground economy. These are individuals who may be employed, but also have a “side hustle” or gig that is often not reported to government agencies. As a result, their businesses are beyond the reach of taxing authorities.
When we suggest they organize, formalize and report their businesses, the most common answer is that it costs money they don’t have, it’s too complicated (meaning too much paperwork) and—not surprisingly—they don’t want to pay taxes. (Interestingly, many don’t consider the legitimate business expenses they can use to reduce their tax liability.)
To be sure, there are barriers to “legitimizing” a business. Government rules may require expenditures for licenses and permits, and there is paperwork involved in establishing a business as a sole ownership, partnership, corporation or limited Liability company. Some structures require detailed By Laws or Operating Agreements. In addition, businesses often need an IRS Employee Identification Number (EIN), a DUNs business credit reporting number (provided by Dun and Bradstreet), and a business plan with short and long-term goals and financial projections. All businesses are also required to file income taxes annually, and there are payroll taxes and other requirements for businesses with full or part-time employees. Lastly, businesses are required to establish and maintain accurate records.
While these requirements can be daunting, no business can afford to ignore them. Arguably, most people form businesses as a pathway to wealth and independence. But this cannot really be accomplished unless businesses are nurtured--and size matters. Establishing a store front and increasing customers, inventory and employees scale a business upward. These steps add revenue exponentially and accelerate a small business from its “start-up” phase to becoming a lasting and growing organization. Only then, and with proven successful systems in place, can a business owner be headed toward financial independence.
This requires time and effort. But the resources for small businesses that want to grow are bountiful. Many government agencies, such as the Small Business Administration (SBA) and local minority and small business development offices offer help. Becoming legit also requires capital--which thankfully is now more plentiful than ever. Interest rates are at historic lows. The federal government is providing Paycheck Protection Program (PPP) loans that can be forgiven (no pay back) under flexible circumstances. Large private-sector companies are providing grants to small women-and-minority-owned companies.
But there is a catch. Most resource agencies and companies want to review the history and records of a business before granting their capital. Therefore, freelancers who do not take the time to organize and formalize their businesses are generally excluded. So, here’s the take-away: Businesses should not be stagnant; they should grow and bear fruit for their owners. Businesses cannot grow unless they legitimize, and helpful resources to do this have never been more plentiful. Now is the right time for underground workers to move forward. Contact us. Aspira-USA offers step-by-step instruction for freelancers and gig workers to help them glide through the process.