It is predicted that by 2030, 50 percent of the population will have a side hustle while 64 percent of the current workforce want to start their own business, but few know what these endeavours actually require to be legally and financially sound. Express.co.uk gathered expert input from across the SME sector, focusing on the legal, financial, personnel and entrepreneurial aspects of business, who shared what expensive mistakes small business owners and side hustlers alike should be avoiding at all costs.
Darren Kenny, a member of Birmingham Law Society and partner at DWF Law LLP, noted that the pandemic saw thousands rush onto online selling platforms to establish their business, but what few know is the fact that online selling comes with an array of legal blunders.
“One of the most common issues is where sellers fail to understand a customer’s right to a refund. Across numerous platforms, sellers advertise that returns will not be accepted and no refunds can be granted. However, there is specific legislation covering online purchases in the UK, namely the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 which sellers must adhere to,” he commented.
“Although high street shops can refuse returns unless an item is faulty, online shoppers have additional rights under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Buyers from UK sellers are entitled to a full refund of the purchase price and delivery costs, regardless of whether the product is faulty. This is because a buying decision is often based on a brief description or photograph which may not translate to the item received. As such, sellers must honour a refund simply if the buyer changes their mind.”
Furthermore, buyers on online marketplaces are entitled to a ‘cooling-off period’ where they have the right to cancel the purchase from the moment they place the order until 14 days after the goods have been received.
Once sellers have been notified of this return the buyer has 14 days to return the goods to them.
Mr Kenny added that sellers can refuse a refund in certain circumstances: “These exemptions include perishable goods such as food, CDs or DVDs where the packaging seal has been broken, and bespoke, made-to-order items. Additionally, sellers can refuse to refund any goods with a broken seal where the seal is used for hygiene reasons, such as medical or cosmetic products.”
It’s important to bear in mind that these legalities are specifically for UK and EU buyers, if a buyer is overseas in a non-EU country there are fewer rights and obligations.
“Sellers must also ensure they completely understand the legal terms and policies of the specific platform they are using. It isn’t always as straightforward as sellers adhering to the region in which they operate,” he concluded.
Marieke Flament, CEO of small business focused banking app Mettle, weighed in on the financial side of entrepreneurship, warning that side hustlers need to check the fine print of their main employment and keeping their business finances separate from their personal accounts.
“If you are starting a side hustle alongside your full time job, the first thing you should do is check your contract. If there are any parts of your contract that say you can’t start another business, it’s probably best not to do so, as it could lead to losing your full time job or even being sued by the company for violating your contract,” she cautioned.
“Once you have checked your contract, you should figure out the best legal set up for your side hustle. Not knowing if you should be a sole trader, a limited company or a partnership could have consequences when it comes to government grants or loans, as well as knowing how much tax you have to pay.”
Ms Flament added that registering as self-employed is vital once money starts coming in: “Once you make more than £1,000 from a side hustle it becomes taxable by HMRC, and you have until October after the tax year ends to get registered for tax or you may face a fine.
“Another thing side hustlers should not do is use their personal bank account for their business banking. When you’re starting out – whether as a sole trader or a limited company – it’s a good idea to set up a separate business account. Signing up to a business account will mean you’ll be able to see what’s coming in and out more easily, use invoicing functionality and connect to an accounting package to help you prepare for tax.”
Lee Biggins and Dominic McGregor added some insight for entrepreneurs and side hustlers on a personal level, noting that the gig economy is becoming a far more attractive way of working and the top three tips all businesspeople should know.
Mr Biggins, the CEO and co-founder of CV-Library, commented that the demand for gig work has been driven by COVID-19.
“The global job market has been hit hard by COVID-19 and there’s not a business that’s escaped any impact. The safest answer for many businesses has been to move to employing gig workers, who can undertake the work on an ad-hoc basis and without the need for long term overheads or commitment.
“An increased number of employers are now turning to the gig market as a first port of call-in order to get the best candidates. And when lockdowns were enforced, many people were out of work, resulting in a high number of capable and skilled workers, ready to meet the instantaneous demand of the gig economy.”
He continued to say that the work/life balance was reviewed by many during lockdown as it forced people to reassess their situation.
“With many families currently having to home-school, more pliable working hours that also offer evening and weekend work are fast becoming a preferred option for many workers.
“COVID-19 brought an abrupt halt to the Monday-Friday, 9-5, office based working day that was the norm for so many workers and the signs are clear that flexible and hybrid ways of working will remain. With this enforced shift and greater flexibility in working hours and patterns, the gig workforce is the natural fit for employers going forward.”
Mr McGregor, co-founder of social media marketing unicorn Social Chain, noted that the small business and gig working lifestyle does require a bit of a mental shift for those starting out in the industry.
“Being an entrepreneur requires huge drive, energy and focus. The path is never, ever easy, but the reason you’re making money is because you’re solving big problems that customers can’t without you. To stay the course and not give up, it’s not the money but the passion for your profession that powers your motivation. It helps you figure out the hard parts and keeps you engaged.
“For me, the best way to be an entrepreneur is to turn your passions into profit, because you enjoy it and wake up every day looking forward to doing it and making a success of it. With Social Chain, I enjoyed it every single day.”
He added that the start of the bringing one’s idea to life in the very beginning is the hardest part: “I say to people, make sure you just start. Once you’ve done that, learn and fail and grow from there.
“And the third piece is to share stories of what you’re doing with people you admire. Ask them for feedback on your progress. Be open to it and let them help you grow. No single version of your idea or product or service is going to be the ‘end product’, it will always evolve and grow. So, make sure that you grow and change as time goes on, and allow your chosen network’s feedback to help guide you,” he concluded.