Legal Business Questions

[photoshowstudio Profile Private messageWebsite]

Doing something i love and making a little money at it is nice, but I guess in getting my feet wet, I didn't realize just how much stuff I'd have to do or have to know about this. I assumed, wrongfully and maybe a little foolishly, that this is someything i could do from home and be very easy, not like I was a "real" business requiring legal documents and all. I doing more research I have found that I am required by my county to register as a general business, which is $107, but free for me as I am a veteran. Also, I am required to register a DBA (yep, had to dig up research on this one), which is "Doing Business As", since I do not use my name in the title of my business, which would cost me $30.

Now, I am in california and have been researching thier laws and will actually need to contact them to see if I have to obtain a business license from them too. I work another job, and live paycheck to paycheck. This is why I thought starting my own business would help bring in that extra income. It hasn't so far, but I am still green in the process and have hopes. I can't afford an attorney to guide me through this and do as much research as I can on the web, but this seems to BIG to me. How do I know that I filed to proper forms? How do I know that I even had to file the proper forms in the 1st place? Is what we do in need of a busines license?

I suppose I would have to just check with loval state and county governments, but if anyone here can help my make sense out of this, I would appreciate it.

[sheldonk Profile Private message]

Hard to know what the requirements are in your jurisdiction for starting a business. The DBA stuff sounds like no big deal. I certainly don't see any reason for you to incorporate. There must be some sites on the web you can find about requirements for your area. I know California probably has the most requirements of any state!

I doubt a business license is required, however, it might be required for any kind of business where you live. It's what they call "revenue"!

As far as business form, you just need to do a schedule C. If you actually are fortunate enough to make money, you'll have to think about quarterly tax payments, etc. Besdies being a Proshow Enthusiast, I'm also an engineer aned a CPA, so if you have more questions...just ask!

Sheldon

[stickgirl Profile Private message]

I would check the state and local government websites for information on starting a business. You can also look at the Small Business Administration website for your area.

Don't forget because now you are selling DVDs, you will need to register with MPEG-LA and submit royalties for every DVD you sell. Registering is free and the royalties are extremely low. Be very careful about copyright infringement for both images and music.

Don't forget to track ALL of your business expenses for the Schedule C. Once you get established, consider business insurance (liability umbrella, errors and omissions, etc.) and incorporating your business in a state like DE (which is friendlier than CA to businesses).

Kathy

[BarbaraC Profile Private messageWebsite]

As a sort of side note to this, which may or may not be of interest to everyone, I've often noticed on the tax forms a special category for earnings made through a hobby. It doesn't seem to involve the necessity for filing even a DBA, but I'm not really sure of all the particulars since I've never thoroughly investigated it.

Barbara

[stickgirl Profile Private message]

I've often noticed on the tax forms a special category for earnings made through a hobby

If you collect stamps as a hobby and then sell part of your collection, the money you receive is taxable and that is where you would report the earnings.

Kathy

[BarbaraC Profile Private messageWebsite]

Kathy, that's downright disappointing!

Barbara

[sheldonk Profile Private message]

Barbara,

I think you're referring to the hobby rule. If you start a sole proprietorship (schedule c) business and doesn't make money for 3 out of 5 years, the IRS will disallow the losses you claim!

Otherwise we would all be in a slide show business and deduct the cost of our PC's, software...etc!

Sheldon

[BarbaraC Profile Private messageWebsite]

I give up. They get us coming, going, and just plain standing still. I hate the IRS.

Barbara

[KellyInAz Profile Private message]

I give up. They get us coming, going, and just plain standing still. I hate the IRS.

Barbara

Me too.

[DickK Profile Private messageWebsite]

I've often noticed on the tax forms a special category for earnings made through a hobby

If you collect stamps as a hobby and then sell part of your collection, the money you receive is taxable and that is where you would report the earnings.
Kathy

Like all things with the IRS, it can get complicated. I'm no expert on this stuff (which is why a CPA is doing my returns lately) but if you have hobby income, you should do a little reading of the rules (or consult a CPA with tax experience). I looked into this quite a few years ago for my wife so I won't say anything specific since it may have changed but at the time you would only need to declare income in excess of expenses but you can't take any losses which is where the hobby rule gets invoked when you're trying to report it as a business. Note the implication tho' that you're tracking income and expenses like a business even tho' you haven't done anything formal to become one.

Dick

[Advantage DVD Productions Profile Private messageWebsite]

"Penny wise, pound foolish". I'm a vet too and money is always an issue. You got to do this right, otherwise the consequences will ruin you.

Personally I chose incorporation sub-chapter C. Lots of benefits to this way. Incorporation can be under $400. Google corporate attorneys in your state. Incorporation sub C will protect your personal assets vis the corporate vail. Your earnings are only taxed once. If while you're on a job and someone gets hurt you won't loose you house.

At least get a corporate attorney consult, or the info should be on Google.

Make sure to get the correct SIC on your license. I suggest 1 employee itinerant photographer license. You'll need "Certificate of Registration", possible city or village license. Home business might pose a problem in your area??? If so then you don't want the clients stopping by your home office.

Make sure to get your FEI number and remit taxes quarterly. Keep your corporate tangible assets list current.

I've been in business 23 years. It's all been really really worth it. If I knew the obstacles to doing business legally I probably would never have gotten into it thinking the task daunting.

Invest in yourself...the financial return will astound you.

[BarbaraC Profile Private messageWebsite]

Personally I chose incorporation sub-chapter C.

You meant sub-chapter S, right? I'm asking because that's how my husband is incorporated--in a sub-chapter S. I'm remarking on this only so no one goes looking for something that might not exist.

Barbara

[Advantage DVD Productions Profile Private messageWebsite]

My apologies...you're right sub-chapter S.

Time for me to get my morning latte. 3 shots I think!

[ctimaging]

You do not need to incorporate, a simple LLC is really all you need. Like a corporation, a LLC (limited liability company) is a separate and distinct legal entity. This means that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The primary advantage of an LLC is that its owners, known as members, are not personally liable for the debts and liabilities of the LLC. For example, if an LLC is forced into bankruptcy, the members will not be required to make up the difference with their own money. If the assets of the LLC are not enough to cover the debts and liabilities, the creditors cannot look to the members, managers or officers for recovery.

An LLC can be taxed either as a "pass-through" entity, like a sole proprietorship or partnership, or as a regular corporation. By default, an LLC is taxed as a pass-through entity, and the owners of the LLC are not subject to double taxation. This is different from a regular corporation, which pays a corporate tax on its net income (the first tax). Then, when the corporation distributes profits, the stockholders pay income tax on dividends (the second tax). With an LLC, the profits "pass through" to the owners who pay taxes at their individual tax rates.

[BarbaraC Profile Private messageWebsite]

Paul, the LLC sounds very much like a sub-chapter S. What are the essential differences between them? I've noticed a lot of LLC's lately and have wondered about them.

Barbara