Obligatory disclaimers: not a lawyer, not an accountant, am employed by Stripe to write about these sorts of topics, writing here only in my personal capacity, none of the following is advice but rather just a pointer for your future Google searches and talks w/ qualified professionals:<p>I ran my businesses for the first ~6 years as unincorporated sole proprietorships. The exact mechanisms of doing this are different based on where you are (both at a national and local level). Japan and the US are fairly similar: a sole proprietorship exists as soon as you say it does. (In Japan, you should probably walk down to the local tax office and file a form announcing your intention to file 青色申告 next year if you plan on making more than $30k revenue. They'll know which form to file and you are capable of doing it write if you can read Japanese.) Some US localities will want you to file for an assumed name / "doing business as" (DBA) with your local county clerk or have a city business license -- you can usually find out about that with some quick Googling. I filed a one-page form with Lake County, IL saying that I was doing business as Kalzumeus Software (several years before I had that LLC) and then had to pay ~$50 or so to put an ad in the newspaper for a few weeks saying "Heads up Kalzumeus Software is actually Patrick."<p>You pay taxes on the <i>profits</i> of the business, not on the <i>revenue</i> of the business, which is a crucially important distinction that many HNers do not know when they start and which many do not properly operationalize even if they know it. I cannot underline this enough: no software entrepreneur I've ever met had a good handle on this when starting. If you sell $10k of software and think "Hmm my profits are maybe $9.5k -- the only expense was a DigitalOcean server" I think your profits are ~$0 after you spend a few hours with an accountant walking through credit card receipts. They're going to walk you through things like e.g. depreciation, apportioning business and personal use of your Internet/cell phone, conferences, business entertaining, (potentially!) home office use [+], etc etc. (A thing your accountant will probably tell you, in the US, is that if you want to decrease your tax burden for 2016 buying a Macbook for the business<p>You should ordinarily be listing income from a side business as business income, at least in the US and Japan, and not as any other type of income. This is both a) correct and b) gives you the ability to deduct expenses, which is not possible on all types of income reported on e.g. one's 1040 or 青色申告.<p>The US has you pay quarterly estimated taxes. There are safe harbors which are likely to cover you in the first year of running your side project. <a href="https://www.irs.gov/publications/p17/ch04.html#en_US_2015_publink100032385" rel="nofollow">https://www.irs.gov/publications/p17/ch04.html#en_US_2015_pu...</a> The calculation of these can occasionally be complicated; this is a great "ask an accountant" question because this is their bread-and-butter and that particularly calculation is something that most accountants would do for free, on spec, as part of soliciting your business for next year. The penalties for not paying estimated tax in a timely manner are very small -- many entrepreneurs of my acquaintance treat timely tax payment as a small discount to the "real" tax bill and elect to simplify their lives by paying taxes once a year rather than by calculating quarterly.<p>The chief reason to put a side project in an LLC is to reduce the risk of liability of the side project flowing to you. Most side projects have vanishingly little liability. Ask me for a citation some other time, but even software development freelancing is low-risk -- my insurance company calculates than ~0.5% of freelancers/consultants get sued in any given year. Downside: when they do get sued, win or lose, that averages $40k in costs. If you're doing something where you have non-trivial liability or if the prospect of $40k+ vanishing just makes you unable to sleep at night, incorporate and get an general liability / E&O policy. (Costs $1k or so per year as a floor; mine as a comparable is $3k and has the words "patient health information" and "HIPAA" on it, which contribute expense and underwriting fun times.)<p>If you have additional questions about this sort of thing, I'm writing about it this week (in my employed capacity) and would love to hear what you're thinking about.<p>[+] Home offices are historically a contentious deduction in the US, but one of the reasons you have an accountant is so that they tell you consequential things about the difference between the regs as written and the regs as customarily applied like "You don't have an office? Oh, in Japan, we just deduct 40% of your rent then. Substantiation requirement? Ah you Americans are such kidders. There's the law on the books which is $CALCULATION but the tax agency basically feels like you don't screw them too much on being aggressive and they won't screw you too much on bringing out a tape measure to your kitchen.")