Passion project, side hustle, escaping the 9-5: whatever you want to call it, it doesn’t always stay something you’re doing for fun on the side.
Thanks to platforms like Etsy and TikTok shops, passion projects following an ongoing trend are turning into big businesses. It doesn’t even need a celebrity influence (like some TikTok shop sellers get) or a massive hype. Like any business, if a trend is ongoing and there’s a demand for it, a well-thought-out business model selling high-quality products or services can quickly become a real business.
The issue is, and it’s especially something Etsy and TikTok passion project sellers don’t consider, that any registered business carries liabilities and risks. Whether it’s selling autumnal candles on TikTok or savings tracker binders on Etsy, business protection applies.
Below, we’ll give you all the ways you can protect your passion project as it becomes a real business.
The Difference Between a Passion Project and a Real Business
Technically, the only difference between a passion project and a ‘real business’ is the size. In the US, if you’re advertising and selling products and services and making money from that, you should register your business with the state and have federal and state tax ID numbers.
Do all passion projects do that? No.
In terms of risk, the difference between a passion project and a real business also technically boils down to size. Naturally, a growing business with a larger customer base is far more susceptible to and liable for business risk.
And depending on the niche, risk further increases. For example, if your passion project is selling personalized scrapbooks, your risk profile isn’t as varied as someone selling personalized lamps. Neither one even sounds that risky.
But what if part of your scrapbook range is for children and comes without a choking warning, and a child chokes on the pen lid that comes with it? Or what if the lamp has a faulty battery-operated system that catches fire even though you sourced the unit from a third-party supplier and only customized it?
Now imagine that risk multiplied because you’re selling to thousands of people instead of hundreds.
Third-Party Hosting Websites Aren’t Liable
Big mistake to make. We’d argue that a lot of the passion projects we’re seeing do come from social media shopping avenues or websites like Etsy. They’re third parties hosting small businesses. Think of them like a catalogue of businesses. They’re not liable in any way for anything that happens to one of the businesses registered to their platforms.
So, going back to the lamp example. If a customer purchases a personalized lamp through an Etsy-registered seller and it catches fire, the fault is directly on the seller. It’s the same with TikTok shop. They have their own business insurance in case they directly do something wrong, and so should any growing passion project.
Business insurance can cover you for the following:
- Cover unexpected costs from business-related accidents or mistakes.
- Offer protection for your business, property, and employees.
- Fulfill proof of insurance requirements from customers, partners, and regulators.
Multiple types of business insurance may apply to your passion project:
- Small businesses
- Self-employed workers
- Limited liability companies (LLCs)
- Home businesses
- Other types of businesses
The Relevant Protection Growing Businesses Should Consider
The relevant protection for your growing business depends on the type of business you’re growing.
Most passion projects start at home, and unless you’re moving into an office or warehouse, we’d recommend, at a minimum, small business insurance, home business insurance, and limited liability company insurance. As soon as you hire even one employee, you should also, by law, take out employee compensation insurance.
If in doubt, you can consult online insurance brokers for guidance and to get a quote.
You can protect your passion project by being mindful that a growing business comes with risk and understanding that insurance is there to cover you. Real businesses need real protection.