Make sharing a success: Business tips for participating in the sharing economy

Photo by Hamster Factor via Flickr Creative Commons

Photo by Hamster Factor via Flickr Creative Commons

Whether you’re renting out a room on Airbnb, offering up your services on Elance-Odesk, or launching a new product via Kickstarter, the sharing economy—spawned because of the technology platforms that now exist to facilitate transactions—has opened up endless possibilities for people to financially benefit from sharing their resources, skills, and ideas.

But while the technology has made it incredibly easy to sign up and start earning money, the laws governing the sharing economy remain confusing and difficult to navigate. Essentially, if you’re earning money through any of these platforms, the government considers you a business—and that comes with responsibilities. Since it’s much easier to plan ahead than get surprised by a sticky financial or legal situation later, we’ve put together some tips and guides that can help you make sharing a success:

Tax implications

Just about every single sharing economy platform will issue you a 1099 for money you’ve received. All of this income needs to be reported on your yearly tax return, and for many, it may mean that you’re subject to self-employment tax. On the flip side, you can write off any “ordinary and necessary” expenses that you incur from running your business, such as your gas you purchase while driving for Lyft, or cost of materials used to make goods that you sell on Etsy. One common mistake, according to sharing economy organization Peers, is forgetting to write off the commission or service fee that platforms take out as part of facilitating the transaction. So yes, that 6-12% guest fee and 3% host fee on Airbnb is fully deductible.

If you’re planning a crowdfunding campaign, do yourself a favor and consult with tax and financial professionals before you begin. One of the biggest problems you can run into is falsely assuming that money you raise is considered a “gift” or capital contribution—in many cases, the IRS may consider it to be income, which has serious tax implications. But by planning ahead, you can save yourself serious headaches. One filmmaker found out the hard way that running his campaign late in the calendar year meant that he only had a few months to spend on expenses to offset the income—if he had simply moved his campaign to January, he would have had a whole year to do so.

Regardless of how much money you make from sharing, it is always good to consult a tax professional about what your options are. You may actually find benefits that work in your favor—for example, if you rent out your home for 14 days or less in a calendar year, that income is not taxable!


After taxes, liability is the next most confusing aspect of the sharing economy. It’s easy to feel secure by the million-dollar guarantees that most of these sites promise, but the fine print usually reveals lots of cracks in their insurance policies that can leave people vulnerable. For example, if you’re renting out your place on Airbnb or Homeaway, or your vehicle on RelayRides or Getaround, your typical homeowner’s, renter’s or auto insurance policies won’t cover any incidences that happen while you are renting your property. Further, if you do not own the place you rent out, you could potentially be voiding your landlord’s building insurance policy and violating your lease.

Uber and Lyft have faced similar complaints about “insurance gaps,” which came to light after an unfortunate incident in San Francisco where a young girl was struck and killed by an Uber driver as he was waiting for a ride to come in through the app. Though Uber’s policy only covers drivers as soon as passengers are in the car, many personal auto insurance policies will deny any claim that happens while a driver is working for a ride-sharing app, including times where they are waiting for rides. Both companies are working on policies to cover this gap, but it’s always good to find out exactly what is covered and what isn’t. PolicyGenius offers a great guide on what typically is or isn’t covered in many basic insurance policies.

Luckily, some sharing economy advocates are taking proactive measures for helping people navigate these tricky waters. Peers recently introduced Homesharing Liability Insurance for those who rent out their residences, as well a Keep Driving program that offers temporary vehicles to drivers to continue ridesharing or delivery services if their own cars have been in accidents or are out of service.

Helpful resources

Peers is a new platform catered to helping independent workers in the sharing economy. Workers can discover different tools to find work, manage their business, and get advice on everything from different platforms available to navigating tax and insurance issues. They have recently launched their own programs to help protect those who rent out their home or use vehicles in their business activities. is an open-source resource run by the Collaborative Fund where you can submit questions regarding business, legal, or tax topics related to the sharing or peer economy. They have sections especially geared toward crowdfunding, marketplaces, and resource sharing.

PolicyGenius is a new resource dedicated to helping people find the right insurance policy for any type of situation. In addition to providing comprehensive guides explaining insurance policies in detail, consumers can get quotes and get a “5-minute Insurance Checkup” to make sure they’ve covered everywhere they need to be.

Collaborative Consumption is a comprehensive online resource for the sharing economy worldwide. The site curates news, events, studies, and resources from major media outlets, as well as produces their own content and trend pieces. The site hosts a comprehensive directory of sharing economy and peer-to-peer platforms, along with a job board that lists open positions at these companies.