Sam Parr Side Project Advice for First-Time Founders

Key Takeaways

• A side project is a real business in the eyes of the IRS once you start trying to make a profit, not just when you hit a specific dollar amount.
• Registering a DBA (Doing Business As) name helps you open a separate bank account to keep your personal grocery money and business revenue apart.
• Transitioning from a hobby to a business allows you to deduct expenses like equipment and software, potentially saving thousands in taxes.
• Small teams should pick side projects that solve a problem they already have rather than chasing viral trends.

Sarah runs a wedding photography business in Nashville with two part-time assistants. Last spring, she started building custom wooden photo boxes in her garage to sell on the side. By October, the woodshop was making more than the photography, but her messy bank statements made it impossible to tell if she was actually keeping any of the profit.

Sam Parr said on X that he essentially builds things until they become too big to ignore. This mindset is vital for the solo shop owner or the 5-person team looking for a new revenue stream. You don't need a $100,000 investment to start something new. You just need a project that solves a small, irritating problem. When the side project starts generating cash, the government expects you to treat it like a professional operation. This means getting an EIN (Employer Identification Number) from the IRS website so you aren't handing out your Social Security number to every new vendor. Keeping your finances separated from day one prevents the dreaded 'commingling' of funds that gets people in trouble during an audit. If you're just starting to move money around, check out this guide to open your first LLC bank account.

Moving from Hobby to Entity

The line between a fun evening project and a taxable business is often thinner than you think. If you intend to make money, the IRS generally views you as a business. This is actually good news for you. It means you can write off the cost of the tools and marketing (plus materials) you use to get off the ground. A roofer in Ohio might start a side project selling specialized ladder hooks. Even if he only sells ten hooks, the cost of the prototype materials could be deductible against his income as long as he maintains clear records.

Protecting Your Personal Assets

• Register a DBA: If you don't want to use your legal name, file a 'Doing Business As' name with your state or county.
• Get a Sales Tax Permit: If you sell physical goods, you likely need a permit from your state's department of revenue to collect sales tax.
• Separate the Cash: Use a dedicated credit card for side project expenses. Never pay for a personal dinner with the business card.

When to File an LLC

• Formation is usually worth it once the project has ongoing customers.
• It provides a layer of protection between your house and your business liabilities.
• You can often file these papers through your Secretary of State's website for a small fee, usually between $50 and $500 depending on your location.

Treating a side project like a real company from the first $1,000 saves you hundred of hours of headache later.

If you find your side project is growing faster than your main gig, it might be time to look at an S-Corp election to save on self-employment taxes. The Small Business Administration provides a clear guide on choosing a business structure which is a must-read before you sign any official papers. Sam Parr built Hampton and My First Million by focusing on what worked and cutting what didn't. You should do the same with your side hustle. If the woodshop makes money but the photography is a drain, don't be afraid to pivot. (Disclosure: we may earn a commission if you sign up through our links.)

Stop overthinking the logo and start tracking the expenses today.

Related free tool

First 30 Days After Forming Your LLC — Walk through the 10 steps every new LLC owner has to knock out. Free, no signup to start.

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📋 Disclaimer

This article is for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations change frequently, and the information presented may not reflect the most current legal developments. Always consult with a qualified professional (CPA, attorney, financial advisor) before making business decisions based on this content. MyBizNerd may receive compensation through affiliate links, but this never influences our recommendations.

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