Starting up a business

[Maggie D]

I am considering opening a small side business.
Does anyone know what to do from the legal point of view?

My main questions are:

1. Registering a business: where? is it necessary? If my business is located at my house which is located in one state and I do business in another state, is there something that I need to do?

2. Paying taxes. Business expenses.

3. Anything else I should be thinking of?

 

[farmerEd]

It is usually necessary to register a business somewhere, in most places. In Mass. for example, if you are a corporation, you register with the secretary of state, if you are a sole proprietor you can register with the town clerk. Laws will vary by state.

Some places restrict home businesses...some don't. Where I live, even though technically you need a permit to run the business from the home, my business required a desk and a computer and never had any customers come to the place...all visits where at clients location. Its unlikely any juristiction (sp?) would complain about that type of setup since it would be impossible to tell...on the other hand, if you want to sell used cars and do oil-changes from your home, and have a big sign out front, almost everyplace I know of will required a lot of paperwork/permits to get up and running.....

If you don't know the first thing about keeping books and doing taxes, than higher an accountant or do a lot of reading. I figured it out all myself and its not really all that hard if you are relatively bright....sure you could screw up, but so do most pros sometimes.

>>Anything else you should be thinking of?

Yes, definitely....

 

[charlie]

Hi Maggie,

I suggest you call your local city administrative office
and ask about registering your business "name".

If your state has a sales tax, they probably have a
website that will allow you to set up for paying
that.

If you plan to hire anybody, you will need to pay state
unemployment tax . You will also need to pay FICA
taxes and FUTA tax to the feds. You may need to
withhold income tax for both the state and US Gov. as
well.

Your best bet is to go to your local book store or library and do some reading on start up of a small business. The US Gov also has websites where you can request publications on this subject.

Best of luck on your venture.

Charlie

 

[Maggie D]

Ok, here is my scenario:

I am not intending to hire anybody. I am not intending to start a corporation. I will be working out of home, but just once in a while. I am still having my regular full time job.
I might do 1 job/month.
I am not required to have any licenses nor permits. My set up will also be just a computer in my bedroom. I will not have any clients coming to my house.
Is this still considered a business which I have to register, or can I just work like that without registering?

 

[charlie]

Maggie,

It sounds like you are selling a service rather than
a product. Some states require payment of sales
tax on various services. You are posing a question
that is in a very gray area. You will have to do your
own research to determine the laws of your local
area. Some might just blow it off and join the
underground economy, but you need to follow your
own conscience.

Cheers,

Charlie

 

[Maggie D]

Yes, I will be selling a service. I will have to look up the laws in Mass. to see what they are.

Thank you

 

[farmerEd]

In Mass, there is no tax on services, and since you are not incorporating, you can either operate under your own name, or else file a DBA (Doing Business As) form with the town clerk in your town....

If people are simply going to pay you as "Maggie Doe" you can just deposit the money into your regular bank account, but you should still keep track of all your income and expense from the business...most will suggest that you open a seperate bank account just for the business and make all deposits into that account, and pay all expenses out of that account....

If you operate under another name (business name), you'll need the DBA form to open the bank account under that name...if you use your own name, you may technically need the DBA, but in your situation you can probably fly under the radar...I would still use a sperate bank account, and either do your won Schedule-C or have it done by an accountant...

 

[Maggie D]

So, what you are saying is that if I am going to do business under my name, I do not have to register my business?

 

[John Galt]

Hello Maggie. I personally have never run into a
situation which requires registration to do business
strictly because you operate
under your own name. The IRS is quite willing to collect
taxes and track your activities with just your SS number.
However, I predict that in the future this idea will catch
on and all activities entered into as "business" will
have to be separately registered. It's obvious. That
would allow more taxation and add another layer of bureaucracy. Mother's milk to politicians.

John Galt

 

[Maggie D]

OK, thanks a lot again.
So this is what I gather:

I can just run my business at home, run it under my name or Some Comany DBA Maggie. Don't have to register. All I have to do is track how much I made from the business and pay taxes on that and I should be fine.
Right?

Can I deduct business expenses from my taxes?

 

[malakito]

OK, thanks a lot again.  
Can I deduct business expenses from my taxes?

Yes. Take a look at Schedule C and the accompanying instructions on the IRS website.

Some of them are:

business mileage or actual auto expenses
office expenses (business cards, staplers, etc.)
portion of home expenses if you maintain a home office
depreciation on home office
inventory / raw goods (if you were manufacturing a product)
professional services (accounting and legal fees)

malakito.

 

[Maggie D]

Thank a lot for all the advices
I'll check out schedule C and all the information on irs website

Thank you