Dear friend, we need to have a talk. Come sit down.
I’ve been watching you for a while now—selling those beautiful handmade earrings on Etsy, doing freelance photography on weekends in Lisbon, offering Spanish tutoring sessions via Zoom while sipping coffee in Mexico City. You’re living the dream, and I’m genuinely happy for you.
But here’s the thing that keeps me up at night: that lovely little hobby of yours? It might have quietly crossed a line. And not the fun kind of line you cross when you spontaneously book a flight to Thailand.
I’m talking about the line between “I made a little money doing something I love” and “I now have legal, tax, and insurance obligations I don’t even know exist.”
## The Moment Everything Changes
Let me be clear: there’s no universal switch that flips at exactly $600 or €500. Different countries have different thresholds, and tax authorities are remarkably creative in their definitions of “business activity.”
But here are the warning signs that your hobby has grown up:
**You’re making money regularly.** Not a one-time sale to a friend, but consistent income. Monthly. Weekly. That pattern matters.
**You’re investing in growth.** New camera equipment. A website. Business cards. Advertising. You’re not just doing this for fun anymore—you’re building something.
**People are seeking you out.** When strangers start finding you and paying you, congratulations: you have customers, not friends doing you favors.
**You’re tracking expenses.** The moment you start keeping receipts “for tax purposes,” some part of you already knows.
## The Tax Reality Check
Here’s where I need you to really listen, especially my nomadic friends bouncing between countries.
**Tax residency doesn’t care about your lifestyle aesthetic.** You might feel like a citizen of the world, but tax authorities feel differently. Most countries will claim you as a tax resident if you spend 183 days there, but some are more aggressive. Portugal wants to know about your “center of vital interests.” The US taxes its citizens no matter where they roam.
When your hobby income enters the picture, you’re not just earning money—you’re potentially creating tax obligations in:
– Your country of citizenship
– Your country of residence
– The country where your clients are located
– The country where you’re physically working
I’ve seen too many bright-eyed remote workers get devastating surprises two years later when tax authorities come knocking. Please, consult a tax professional who understands cross-border situations BEFORE you reach significant income levels. The cost of that consultation is nothing compared to the penalties for getting it wrong.
## The Liability Blind Spot
Now, let’s talk about something that makes my protective instincts go into overdrive: liability.
When you’re doing photography for fun and your equipment bag trips someone at a café, that’s unfortunate. When you’re doing photography for a paying client and the same thing happens, that’s a lawsuit waiting to happen.
The moment money changes hands, expectations change. Legal responsibilities change. A dissatisfied customer isn’t just a disappointed friend—they’re someone who might take legal action.
Consider these scenarios:
– Your handmade candle causes a small fire in a customer’s home
– Your travel consulting advice leads someone to a destination during an undisclosed rainy season, ruining their honeymoon
– Your online fitness coaching results in a client injury
– Your graphic design work allegedly infringes on someone’s copyright
Without proper business structure and insurance, your personal assets—that emergency fund you’ve carefully built, your equipment, your savings—are all on the table.
## The Insurance Gap Nobody Tells You About
This is the part where I really need you to lean in, because this is the fine print that breaks my heart when people discover it too late.
**Your travel insurance almost certainly doesn’t cover business activities.**
Read that again.
That lovely digital nomad insurance policy you’re so proud of? Pull it out right now. Find the exclusions section. Look for language about “professional activities,” “business pursuits,” or “commercial endeavors.”
I’ll wait.
See it? Most travel and health insurance policies have explicit exclusions for injuries or incidents that occur while you’re working—especially if that work involves physical activity, meeting clients, or operating equipment.
That means:
– If you hurt your back while doing a professional photoshoot, your travel health insurance might deny the claim
– If your laptop is stolen with client data on it, your belongings coverage might not apply since it was “business equipment”
– If you’re in a scooter accident on your way to meet a client, that gray area could cost you everything
**What you actually need:**
– Professional liability insurance (also called errors and omissions)
– General liability insurance for your business activities
– Potentially product liability if you’re selling physical goods
– Equipment coverage that explicitly includes professional use
– Health insurance that doesn’t exclude work-related incidents
## The Practical Path Forward
I’m not trying to scare you out of doing what you love. Quite the opposite. I want you to keep doing it—just with your eyes open and your back protected.
Here’s your action checklist:
**1. Track everything starting now.** Income, expenses, dates, locations. You’ll thank me during tax season.
**2. Research the magic numbers.** Find out the tax registration thresholds in your country of residence. In the US, $400 of self-employment income triggers obligations. In the UK, it’s £1,000. In Germany, the bureaucracy starts earlier.
**3. Read your current insurance policies.** All of them. Look for business exclusions. Highlight them. Understand exactly where your coverage ends.
**4. Consult professionals.** A cross-border tax specialist and an insurance broker who understands remote work. Yes, this costs money. It costs far less than the alternative.
**5. Consider formalizing.** Whether it’s registering as a sole trader, forming an LLC, or another structure, there’s often a point where formalization actually protects you more than it burdens you.
**6. Keep personal and business separate.** Different bank accounts. Different credit cards. This isn’t just good practice—it’s protection if things ever get complicated.
## A Final Word From Your Protective Friend
I know this feels like a lot. I know you started selling those earrings or offering those consultations because it brought you joy, and now here I am talking about liability and tax residency.
But here’s the truth I’ve learned from years of reading the fine print: the people who get hurt the most are the ones who didn’t know the rules existed. They’re not careless or irresponsible—they’re just uninformed.
You’re not uninformed anymore.
The line between hobby and business isn’t a wall—it’s a door. And walking through it deliberately, with proper preparation, means you get to keep doing what you love without the nightmare of unexpected consequences.
I’m not asking you to be afraid. I’m asking you to be prepared.
That’s what people who care about you do. We make sure you’ve got your seatbelt on before the journey continues.
Now go forth, do beautiful work, and for heaven’s sake—read your policy documents.
With protective warmth,
Ricardo