Is That Even Legal?
Is That Even Legal?
Your Side Hustle Could Get You in Trouble!
Your side hustle might be breaking the law without you even realizing it. From hair styling in your living room to weekend handyman projects, what starts as innocent extra income can quickly cross invisible legal boundaries—with serious consequences.
Attorney Marshall Hunt returns to dissect the hidden legal risks lurking beneath today's booming side gig economy. While everyone seems obsessed with developing that perfect income stream, few understand when these activities trigger legal requirements. Hunt reveals how licensing requirements now affect 30% of American careers, up from just 5% fifty years ago, creating a minefield for unsuspecting entrepreneurs.
The conversation dives deep into unlicensed contracting—a particular danger zone where well-meaning handymen can find themselves facing criminal charges, unable to collect payment for their work, and personally liable for any damages. We explore real-world examples of entrepreneurs who started small in residential neighborhoods only to face angry neighbors, zoning violations, and HOA restrictions that threatened their livelihoods. One mechanic's journey from fixing cars in his yard to running a legitimate multi-bay shop demonstrates both the promise and peril of growing side businesses.
As your side hustle expands, so do the risks. Hunt explains when it's time to consider professional insurance and form an LLC to protect your personal assets. The good news? That LLC is easier to set up and maintain than you might think—and could save you from financial disaster if something goes wrong. Whether you're moonlighting as an electrician, selling crafts online, or renting out property, this episode provides the essential legal framework to protect yourself while pursuing your entrepreneurial dreams.
Ready to make sure your side hustle stays on the right side of the law? Subscribe now and learn how to transform your passion project into a legitimate business without the legal headaches.
Is that even legal? It's a question we ask ourselves on a daily basis. We ask it about our neighbors, we ask it about our elected officials, we ask it about our family and sometimes we ask it to ourselves. The law is complex and it impacts everyone all the time, and that's why we are here. I'm attorney Bob Sewell and this is season five of the Worldwide Podcast that explores that one burning question. Is that even legal? Let's go.
Bob Sewell:Today's guest on Is that Even Legal? Is Marshall Hunt. Marshall Hunt is a return guest. Welcome to the show.
Marshall Hunt:Hey Bob, Thanks for having me.
Bob Sewell:So the reason why I wanted to have you on today is you're a commercial and civil litigator and you help people who are in trouble on civil matters, typically business matters. Other matters too, and you're seeing something out there. I've heard with side hustles and we're seeing a lot of people engaging in side hustles. My wife thinks she needs to have a side hustle. She wants to have a side business. My best friend across the street he thinks he needs to have a side hustle. No one's relaxing anymore. They want to have that side business that's going to make them the money they feel they need to have the lifestyle they want.
Marshall Hunt:Right, right, yeah, some of the high side hustles get crazy too. I was just reading the New York Times had a piece a couple months ago about all these struggling underemployed actors that are, you know, understudies for off-broadway productions that need to pay the rent. And so apparently what these guys did is they're gaming the algorithm for the lyft bike share system in new york. And you know, the lyft pays people basically to move bikes from, uh, overcrowded stations with too many bikes to underserved stations with not enough bikes. And so these guys realize if we move all the bikes to one station and then take all the bikes away from a station nearby, we can move them back and forth and make up to I think it's at $6,000 a month on a good month. You know game in the system, so I thought that was a heck on a good month. Uh, you know game in the system, so I thought that was a heck of a heck of a side hustle yeah, that I mean that's that blows my mind, because we're talking about 70.
Bob Sewell:you know that's a 70 plus thousand dollar a year salary for moving bikes around, and I, and, and you know that is not a lot of money in new York City, but that's well above average income for an average American, and so that's blowing my mind. But what I'm seeing and what I'm hearing about are people who are their side. Hustle is no longer a hustle, it's a business. What am I looking for when something like that happens?
Marshall Hunt:Yeah, that's when you got to start watching out. I mean, obviously the point of the side hustle is to make money, so in some ways you're happy when it makes enough money to require you to actually pay attention to some of the business risks of a side hustle, but you do got to pay attention to them. So here's a few that I've been thinking about. The first one is professional licensing. So I looked it up.
Marshall Hunt:Brookings Institute says that about 30% of careers these days in the United States require a license. So 50 years ago that was 5%. Anyone could start a business and chances were they weren't going to have to get some type of professional license from their state. But these days, 3 in 10 chance your side hustle might require a license. So it's something to think about, depending on your state. Let's say you're just doing hair or makeup in your living room or you're moonlighting as a locksmith or you're doing interior design for your friends. All of those in some states are licensed professions at this point. You know some cities even require a local business license to do business in the city, and so it can be sort of a minefield for someone that just wants to earn a little bit of extra cash to watch out and get one of those licenses.
Bob Sewell:Yeah, I mean you end up people end up breaking the law and they don't even know it right. They just want to be a good citizen and make some money and support their family, and then we have this minefield of laws we're looking at.
Marshall Hunt:Yeah, I mean, reasonable, minds could differ whether these licenses are just economic protectionism by the people in those professions that you know want to create their own little guild, or whether this is actually a good use of state resources. But that's a podcast for another day. The one that I think people get people in the most trouble, in Arizona at least, is contracting. You know it's not the all-important driver of our economy in Arizona these days like it was maybe 20 years ago, but it's still a huge part of our economy and in Arizona you can do basically simple handyman work for under $1,000 without a license, but above that you need to be a licensed contractor. In Arizona, and especially these days, $1,000 doesn't go very far and you know, especially these days, $1,000 doesn't go very far.
Marshall Hunt:And so anyone that is handy with a hammer and is out there swinging it on the nights and weekends trying to make a little extra money is, if they're not licensed, they're probably licensed contracting without a license and that can get you in some trouble. So the things you got to watch out for, for instance, in Arizona and I think probably most States if you do unlicensed contracting and then the person you're working for doesn't pay you, you can't sue them in Arizona to get your money. You know it's a decision by the state that says we want to discourage unlicensed contracting and so we're not going to let you sue in our courts to get paid for unlicensed contracting. And so you know, I've seen it be. You know six figure issues. A guy builds a house but does it without a license or maybe the not the correct license, and if he gets stiff, stiffed on the bill he's really out of luck. You know contracting.
Bob Sewell:Yeah.
Marshall Hunt:Yeah.
Bob Sewell:Yeah, that's it. You know I got a great idea, marshall. I mean, you, you, you, you, uh, you said I think I could be a thousand dollars. My job can be a thousand dollars, right, right. And so, basically, I think that's like the handyman exception or something, right, right? So what I'm going to do is, on my side, hustle is, I'm going to paint your house, Marshall, and I'll paint half of it for $1,000 and the other half for $1,000.
Marshall Hunt:The state doesn't want you to know this. One easy trick to get around the licensing statute that's going to work right. I think probably they would view that as an attempt to get around the licensure statute and probably still throw the book at you there. But I like the inventive thinking you know, kind of painting one brick at a time.
Bob Sewell:Exactly there's a time. Exactly there's a thousand dollar brick. Now I'm going to contract with it. But the problem is people do this.
Marshall Hunt:They do it. And if they do it, they're playing with fire. I mean, Arizona, unlicensed contracting is a class one misdemeanor. Unlicensed contracting is a class one misdemeanor. It's a crime as well as potentially, as you know, exposing you to civil penalties. Class one misdemeanor is maximum six months in jail and $1,000 fine. I mean I think it's unlikely that the state's spending much time prosecuting criminally and sending people to jail for unlicensed contracting, but if you get caught once and you get caught twice and you get caught three times, I mean you're really playing with fire with something like that.
Bob Sewell:But here, marshall, it's my side hustle. And you telling me I mean, when I go and I get licensed, I have to produce a bond right, it's not a huge bond, but it's some sort of bond and I have to go through and jump through the hoops to pass their test or whatever it is. And now what you're telling me is don't do my side hustle, because if I do a kitchen every three months, because I'm a hell of a cabinetmaker, I now am running afoul of the law. So don't do my side hustle.
Marshall Hunt:Yeah, and I would say don't do your side hustle if you listen to the attorneys, because we're the real risk averse guys, but at least at the very least be aware of the risks If you are contracting without've personally experienced in some of my cases is when your side hustle runs afoul of zoning and deed restrictions. Yeah, so you know, you and I both are living the suburban dream. We live in our quaint suburban neighborhoods. I don't know about you. I don't have an HOA. You probably do right, You're in a bit of know about you. I don't have an HOA. You probably do right, You're in a bit of an HOA.
Bob Sewell:Yeah, I got an HOA.
Marshall Hunt:All right, you've got an HOA, you've got CC&Rs. You know, I think your neighborhood's like Edward Scissorhands, basically right, everyone's in nice colorful outfits and matching lawns and the whole thing, whole thing. But um, so in most CCNRs, sometimes even in um places that don't have an HOA but do have private deed restrictions written on your deed. Sometimes in your city zoning there are going to be restrictions on commercial use of especially suburban homes. But you know, anywhere that's zoned for residential or has people living there, there's going to be, you know, restrictions on what you can use your house for as far as a commercial enterprise. So a couple of examples that I personally have seen.
Marshall Hunt:You know, I had a case where a woman just did hair out of her home and she got into this big dispute with her neighbors. It wasn't really about the hair, but when they got into a dispute and they got into court, this comes out and the other side starts using this as a cudgel to try to get leverage against her to say you know, we're going to shut down your hair business because it's against this deed restriction that says no commercial use. I had another mechanic friend who had some acreage. He decided he's going to work on friends and family's car in the back workshop and all of a sudden again he's getting into disputes with his neighbors who don't like the cars coming in all the time and sitting outside, and so they got this sort of unsightly mechanic shop going in their nice horse property out in the Southeast Valley.
Bob Sewell:So you know that happened in my neighborhood. There was a guy, and it was during the downturn of the economy and he ends up losing his gig at the Toyota dealership and so he's like, well, what am I gonna do? And so he starts fixing cars in his front yard in a, in a well manicured hoa situation, and you know, and, and most people understood and didn't think anything of it, and he would fix a car or two a week and then next thing, you know, he's got a lineup of cars, yeah, and it only takes one angry neighbor.
Bob Sewell:And I liked the guy and so I never said anything and I also knew that someone else would right. And next thing, you know his house and the street looks like it's a used car lot and pretty soon he had to go find another place to do his business and from a very practical perspective that's not a bad thing, right? I mean, he went from working for someone to working out of his house and when his place wasn't working anymore for him he went out and found some commercial space and it was trash commercial space and he worked on his car some more. And then he has a big garage, now you know where. He's got three or four bays and he's got you know a dozen employees that are coming in and he's selling his services and he's got a line of cars always his services and he's got a line of cars, always it's. It's a uh, you know, I mean that's the the hope of every side hustle, but you're you're going to step on a few landmines when you're doing it my parents uh neighborhood.
Marshall Hunt:They had someone in the neighborhood that basically turned their yard sales into us, maybe beyond side hustle. They were almost like running an auction house, but they were running these huge garage sales every weekend and it made the neighbors mad and they sort of revolted. And I don't think my parents have an HOA, but they found some way to shut the guys down. I think under commercial, you know residential zoning rules. So yeah, you, you gotta watch out. I mean, even if you're just selling t-shirts out of your house or something and you think, oh, it's no big deal, it's just within the four corners of my house, maybe you have delivery trucks coming all the time, there's going to be someone on your street that isn't happy about it too, and it's another thing to think about. At what point does your side hustle start to get you in hot water with your neighbors?
Bob Sewell:What do I? At some point, my side hustle is too big and I'm going to start looking at some potential liability here. What am I going to be thinking about?
Marshall Hunt:What am I looking for? It's a good way to think about it, because you're not in most cases doing the side hustle. What am I looking for terms of traditional ways that traditional businesses try to mitigate risk and potential liabilities? You know, and it's not hard to see, how quickly something like that could come up. You know, if a guy is moonlighting as an electrician, let's say he's a great electrician and let's say he's even staying under that thousand dollar limit we talked about and he's just doing $500 jobs to install, you know, recessed lighting or change outlets or you know whatever else, and he gets a little extra cash for Christmas. But you know, electrician, it's not hard to see that you carry some real, significant potential liability there. God forbid, something goes wrong, house burns down, homeowners looking at you to compensate them, and if you're just doing this in your own name as your side hustle on a handshake, you haven't really done anything to mitigate your risk.
Marshall Hunt:So you know a traditional business, for instance, is going to look at you know insurance. You know it's a classic way to mitigate your risk. You say, look, I pay the insurance premiums and if something goes wrong, the insurance ostensibly comes in and covers it. So you know if you're doing a side hustle and it's really successful and it's starting to take more of your time, it's worth thinking about. You know what insurable risks do I have? Uh, what do the premiums for those types of risks cost? Do the profits on the one hand of my side hustle and the you know, do they justify paying those premiums and insuring against those risks? You know it's a sort of a heuristic you can use to think through those potential risks.
Bob Sewell:What about corporate form? When should I? Start thinking about you know, I had a small business. That's how I put myself through. School was my small business. I ran it out of my name. I didn't have corporate form. I didn't feel like I needed it, but at some point your corporate form should be considered right. And what should I be thinking of?
Marshall Hunt:Yeah, you like to give me a hard time about my rock and roll days when I was in a band in college and after college some.
Marshall Hunt:But even the band that I played in was, you know, rock and roll is truly dead because our band was operated as an LLC and, uh, the sort of singer songwriter that ran the band would, you know, uh, have people pay his LLC and you know, I think he used it for, you know, tax purposes and things like that. But, um, so, yeah, you know, even even your, even your side hustle band can, can, uh, take on the uh corporate formation. But yeah, that uh, uh, limited liability company is sort of the, the form du jour. For a lot of reasons. It's easy to form, doesn't require as many formalities as a traditional corporation, um, and I think that thinking about those same types of things with respect to insurance are incurred as part of that business, but doesn't expose the individual to those same debts.
Marshall Hunt:But to actually make an LLC useful, you've got to, in most instances, have the LLC, have its own bank account. It's not necessarily always going to do its own taxes, but you're going to have to account for it on your taxes in one way or another. Um, you know it's, you're going to have to have some sorts of formalities. You're likely going to have to form contracts in the name of the business, things like that. And so, again, depending on your side hustle and the nature of it, you probably want to think about at what point again, is the extra time and expense which, with an LLC, is not very great Once you get it formed, for a few hundred bucks, in most instances it doesn't take a lot of extra work and, again, in the context of something like our electrician, I think the potential benefits are very, very great. And so I think, forming an LLC, anything beyond a babysitter or a lemonade stand you probably start thinking about some type of corporate formation.
Bob Sewell:Yeah, yeah, I think you're right. And the thing is they're so easy to manage LLCs compared to the day and the age when you'd have your choice for corporate form was a corporation with shares and all this type of stuff. No, an LLC is a lot easier to manage and it gives you a lot of benefits for creditor protection and, yeah, it's really worth thinking about. And, by the way, I only tease you about the band because I'm jealous, Because I've always the thing is and you've heard me say this before, Marshall I've always wanted to be in the band. So when someone asked me, what are you doing with your life right now? I could say I'm getting the band. So when someone asked me, what are you doing with your life right now, I could say I'm getting the band back together, yes, and like get you. And you could say that we're getting the band back together.
Marshall Hunt:we're gonna do one more run at it yeah, I mean you gotta start the band, go somewhere with the band, have the band break up, have the band be broken up for a while all before you're ready to get the band back together. That's where I am now. The band's long up for a while all before you're ready to get the band back together. That's where I am now. The band's long, you know in my past. I'm ready to get the band back together. It's time.
Bob Sewell:Yeah, all right, marshall, you've given me a lot to think about. Thanks for coming on. If I need to get a hold of you, my side hustle is becoming unwieldy. What should I do? How do I get a hold of you?
Marshall Hunt:Yeah, marshall Hunt. I work at Davis Miles in Arizona. Our website is davismilescom. Email mhunt at davismiles, best way to reach me.
Bob Sewell:Thanks, thanks for coming on.
Bob Sewell:Thanks for listening to the podcast, thanks, thanks for coming on and, as lovable as we are, we are not your lawyers and we are not giving you legal advice, but if you need some legal advice, get some. There are some great lawyers out there and we are always ready to help. See you next time.