Finally, you found ways to make money using your hobby. Congratulations! But before you run crazy with thinking of how many cups of coffee it will buy you, there are some rather unattractive bureaucracies to deal with. Overlooking this stage is one of those amateur mistakes that you really need to avoid.
Sole Proprietorship is sweatpants of business entities. It is comfortable and easy to wear, requiring no formality whatsoever. Your business and you are regarded as one entity by law and, therefore, your vintage sneaker collection is on the line in case your business gets sued.
First of all, pick up a business name. You could always go with your legal name, however “Sarah Jenkins Consulting” looks quite dull. In case you choose catchy names such as “Pixel Pusher Designs” you will have to obtain a DBA – “Doing Business As”. It is nothing more than an alias registration.
Now visit your county clerk or fill out this form online and pay for it. You will receive a certificate, which is needed for opening a bank account. Messing up your business and personal finances is a nightmare when it comes to taxes.
Next thing you should do is pay a visit to the tax man. Depending on your state or city you should get a general business license. It is just a legal permit for operating your business in a particular area. Visit your city hall website, where this kind of annual fee needs to be paid.
If you are planning to sell anything, then you will require obtaining a Seller’s Permit. With it you will be able to charge sales tax from your clients. Don’t even think about avoiding this step as State tax authorities are rather persistent in their quest of collecting taxes from businesses.
Also you will need EIN (Employment Identification Number) from the IRS. It is similar to your Social Security Number, however, designed specifically for your business. It is totally free to get and takes no more than five minutes. Furthermore, it prevents you from giving away your SSN to shady vendors.
Nobody ever started a business to experience the joys of bureaucracy. It was all about flexibility and extra money. Consider it the cost of your freedom.