Proudly sponsored by

The legal dangers of a side hustle

Entrepreneurs and startups can avoid possible missteps or penalties if they fully understand the legal prescripts that apply to their business: Dominique Arteiro – Werksmans Attorneys.

FIFI PETERS: These days most people have a side hustle or a job that gives them income outside of their standard nine-to-five jobs. While selling Tupperware on the side, or being an Instagram influencer for brands, may seem pretty harmless you may find yourself in trouble with the law if you don’t have the right policies set up in place for your side hustle from the get-go.

Dominique Arturo is a director at Werksmans Attorneys; he is here to tell us how we can avoid being on the wrong side of the law. Dominique, thanks so much for your time and for joining the show.

DOMINIQUE ARTEIRO: Thank you, Fifi, and good to be on the show.

FIFI PETERS: What are the common mistakes you find that people do make with side hustles that potentially land them in trouble with the law?

DOMINIQUE ARTEIRO: What we find in practice is that people don’t focus on the structure of a side hustle or a business venture from the get-go. So what we find is that they don’t consult an attorney and also they’re not aware of the legal prescripts which apply to their business.

For example, there are pieces of legislation which apply to large companies and to entrepreneurs and startups. Some people are just not aware of those things like the labour legislation or the Consumer Protection Act.

FIFI PETERS: What does this mean when it comes to, for instance, my aunt, who happens to sell Tupperware outside of her job at a retailer. Could you just practically outline some of these examples by way of the labour and the competition laws that my aunt should potentially be aware of?

DOMINIQUE ARTEIRO: Certainly, will do. The first important thing to recognise is that, in terms of the limiting legal risk, there’s something called ‘asset protection’, which is a colloquial term which refers to the business entity you come back to your startup or your new business through. That asset protection protects your assets and it also gives you some distance between your creditors, who have any claims against your business should or should it not succeed.

In terms of the labour legislation, what we find is that many startups or many people who have a side hustle tend to shy away from employing anyone because they are just unfamiliar with the labour legislation, or they find it to be too restrictive, or they just don’t want to fall foul of the laws. And as we know, human capital or your human resource can really assist you in scaling your business and growing revenue.

From a competition law perspective, I think something that you’ve touched on is that collaborations between competitors might end up in hot water. This could be inadvertent, but it is important to be aware of the different types of legislation which affect your business. What we find in practice is that a lot of people don’t know what they don’t know, and this is where your legal advisor or your legal MVP, as we call it, your most valuable player, is important in giving you the advice that you need in a timely manner which is practical and bespoke to your particular business venture.

FIFI PETERS: Dominique, this is all sounding so complicated. At the end of the day, I’m thinking about this as maybe an Instagram influencer that has all these brands using my page for advertising, and I’m thinking ‘I don’t even make that much on the side anyway’. So the question is, at what point should these legal structures be in place? Does it not depend on the size of the company that you have, or the side hustle that you have and the amount of money you are making on the side?

DOMINIQUE ARTEIRO: That’s a very good question. I think we’d like to see something like that. But that’s a policy decision and really dependent on legislation to try and spur more entrepreneurs into the market.

But unfortunately there is a bit of a minefield. What we see in practice is that the legislation does not distinguish based on turnover quite often, it doesn’t distinguish based on the type of business that one’s involved in, or the side hustle essentially. So the pieces of legislation that I’ve mentioned and others apply from day one of the side hustle.

So the Consumer Protection Act would apply to that side hustle business, and labour legislation if you have employees or independent contractors or even part-time workers. But the role of the attorney really is to simplify things. Your focus as an entrepreneur and when you starting a side hustle really should be on the business, not on becoming an attorney or a legal advisor. And that’s where consulting someone who’s skilled and trained in the law can simplify things for you, someone who can use their experience and their business acumen to guide you. So really their job is to direct us to the pieces of legislation which would apply, and identify the obligations that you need to comply with.

FIFI PETERS: So essentially you’re saying that for anyone – no matter how big or small your side hustle is – if you’re thinking of getting that additional income outside of your main nine-to-five job, it would be quite a good idea to consult a lawyer or legal person to help you set up a structure in which you can get yourself a lot more protection from the law.

DOMINIQUE ARTEIRO: Exactly. A half an hour consultation, for example, could help you to avoid penalties, could help you to avoid legal risk, and can help you structure your business or your startup from the get-go, or even give you some ideas on how to scale.

FIFI PETERS: We’re living in a time where I think there’s a lot of innovation happening in the technology space, and we’re seeing fantastic new startups coming to the fore. But I see you are also guiding here that there are some disclosure, or non-disclosure agreements that people who are starting tech startups need to be aware of. Just give us the detail here.

DOMINIQUE ARTEIRO: Certainly. The digital entrepreneurship space is a very exciting one, and one that we follow quite closely. But what is important is obviously to try and translate your innovations into your businesses. What does become important at the conceptual stage is to ensure that your idea or your business venture is legally protected. What we often see happen is parties who wish to collaborate often enter into something called a non-disclosure agreement or an NDA, which governs the terms on which they interact with one another but also the basis on which they share competitive and confidential information related to the startup. The simplified idea is that you don’t want to share your idea with someone who’s going to steal it and go and commercialise it and effectively steal your idea; but it also provides a certain level of protection so that you know that you can be candid in your discussions with this other party and perhaps find a synergy which can grow your business or help it scale.

FIFI PETERS: And then just staying in the tech space, for all the bloggers and the influencers and the like, you are advising that they also be mindful of certain policies – not only to protect them and their businesses, but also their subscribers.,

DOMINIQUE ARTEIRO: Correct, Fifi. For example, if they have a subscription list or subscriber list or they’re selling products online, we think it would be important for them just to take legal advice as to what legislation affects what they’re doing and how they should, for example, protect any personal information which they are processing, in terms of the Popia or the Prediction of Personal Information Act.

FIFI PETERS: A fascinating conversation, . Dominique. Thank you so much, for a really bringing home the importance of having a right legal structure – no matter what size you are as a business, no matter how much money or how little money you are making – to ensure that you are protected, particularly should anything go wrong, so that to your personal assets are not touched in that eventuality.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

AUTHOR PROFILE

COMMENTS   1

You must be signed in to comment.

SIGN IN SIGN UP

I find it extremely irrisponsible for moneyweb to include the Shoprite Holdings shareprice in this interview. Dignity and respect lost.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles:
Click a Company: