This is where your finance takes place

- Set up a Proper Structure -

So far, we saw how to establish your possible sources of alter native income, how to select your financial partner and also why you would need a financial partner. Once you know what you want to do and with whom, you need to identify your goal properly. So at this stage, you should have your idea, your partner and the beginning of a financial plan (a goal well defined).

Sole proprietorship

After thinking about all the above mentioned points, you may decide to go on your own. In the end, there is no rule about how many partners you should have to run your business. If you think you have all the necessary resources by yourself, you are more than welcome to try!

Therefore, you may want to keep the administration as simple as possible. It won’t cost you much in accounting charges and your sideline income (loss) will directly affect your personal revenue. If you are in the highest tax bracket, it might not be the smartest choice unless your alternative source of income becomes an alternative source of loss!

Incorporation

If you have partners or you don’t want to blend your other sources of income with your working salary, it is definitely a good idea to create a corporation. In simple terms, a corporation is another legal entity; another person for the government’s eyes.

The major advantage is that you have a much stronger structure to add or remove partners, grow your business and create a legal separation between you as an individual and you as a business owner.

On the other side, the incorporation will be taxed on its income and so are you when you will withdraw money from the corporation. This income will be added to your global revenue and therefore applicable to your marginal tax rate.

We decided to go ahead with the incorporation since we are two in our adventures and it was easier to cover any possibilities within the legal entity than with our personal situations. It obviously cost more in accounting charges to start with but we are convinced that we are using the right tool in order to manage our project.

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- How To Setup Yours Goals Properly -

in part 2 of my alternative source of income series I about people saying: “we should start a business together someday”. I have already wrote about with whom you should start your project and why you would need a financial partner. Unfortunately, most people have great ideas, some of them have enough resources and a trustworthy financial partner to start working but very few of them have a solid plan. Those are the one who succeeds most of the time.

You don’t want to take the time to write down a plan? Then, don’t take the time to start a small business; it’s worthless without a plan. Today, I am writing about a simple technique I learned from my MBA class. So here are the basic lines of the SMART technique.

Specific

You goal must be well determined so you don’t waste your time working like crazy without any direction. The goal of our internet project was simple: creating or buying websites that will produce stable monthly income.

Measurable

The main goal behind creating an alternative source of income is to improve your financial situation. Therefore, you need to be able to set specific measures of your success. If not, you may never become satisfied and always be looking for more. While it may not seem bad on a financial point of view, your health and family might take a big hit.

Ambitious

That goes along the motivation part of the equation. If the project is not important enough or you don’t need the money that bad, chances are that you will leave it behind some day. Working over 40 hours automatically implies tiredness at one point. The importance of your goal will bring you back on track and will give you the energy to continue.

Realistic

We all dream about having a nice car, a vacation property by the lake and enough money to buy whatever we want whenever we want. However, creating the next Google is definitely not in my plan. We have to stay realistic with what we do.

Timely

Every goals needs to be measurable. “I want to make money” is not a real goal. You need to define how much you want to make, by what time and how. If you determine everything in advance, you will be in a much better position to evaluate how your project went and establish what needs to be done in order to continue.

At first, we had a hard time writing down our specific goals. The ultimate goal was to create a monthly income of $1,000 after a year of operation. I know that we will not be satisfied with this cash flow but it is good enough for the first year!

Remember, having goals is nothing, defining them is everything.

For more information on the SMART technique, please read Managing Service Delivery Processes.

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- Why should you have a financial partner? -

In Part2 of my alternative sources of income series I discuss the different type of financial partner you may have along the way. Some people would rather do everything alone and remain in full control of their project. However, there are plenty of advantages of having a financial partner to share this adventure with. Today, I am explaining the different reasons why you may seek for a partner in order to create an alternative source of income.

Lack of time

You must not forget that your goal is to create an alternative source of income and not to replace your existing one. Therefore, you might run out of time once in a while. Having a partner will smoother the transition between the time you use to take watching TV and the time that you will now take to work on making more money. The fact that somebody works with you will still allow you some TV time in your schedule

Lack of resources

This is particularly true if your alternative source of income requires an amount of money to start with. It is the case if you are buying a small stores or a rental property. You can borrow most of what it required but banks will still request that you show some liquidity. A financial partner could be of a great help when it comes down to get approved for a loan.

Lack of knowledge

This is one of the reasons why I decided to go into a partnership with one of my friend. I don’t have much coding knowledge and don’t quite understand how the whole web works. However, I can blog and I can promote our websites. My friend and I have a lot of qualities that are complementary and we definitely have much more chance of being successful together than by ourselves.

Lack of motivation

Creating more income while you work, take care of your family and have a social life is quite a challenge. It is very possible that you want to slack off or even quit. However, if you are working with somebody else, chances are that you will not be discouraged at the same time and you will be able to support each other.

Lack of creativity

The human mind is a beautiful thing. Human minds put together become a machine with infinite possibilities. Challenging each other has been the most productive exercise my friend and I have ever did. It forces us to go to the source of each problem and find more than one solution.

It is obvious that there are not only good sides of having a financial partner. However, I strongly believe that the advantages compensate for the few rock blocks you may encounter.

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