I wanted to give a quick report about our meeting on Tuesday night - we had Eric Bryant be our guest speaker and he was able to answer any and all of our tax/small business start up questions. We've got team members in all stages of set up and it was very helpful to have some definite answers to our questions.
A few main topics of concern were:
Q: How do I know when to turn my hobby into a business and get it licensed?
A: Once you start turning a noticable profit. Keep track of your expenses and once the gains are getting big, go ahead and register with the state for a business license.
Q: If I am a sole proprietorship, what kind of deductions can I make?
A: You can only claim deductions if you are showing a profit. You can deduct the expenses of your home office space and utilities of using that space, millage of driving for business related trips (56 cents per gallon - adds up quickly!) cost of supplies, etc. These would be filled out on the "Schedule C" of your personal tax form. You cannot claim a home office expense if you are set up as a corporation.
Q: If I'm only selling online, not locally, do I still need to license my business?
A: Yes. It's a state/federal requirement that anyone selling online needs to have a licensed business. You don't need a seller's permit necessarily, but do need to register for the $200 business license.
Q: Should I turn my sole proprietorship into a partnership/corporation?
A: But doing so, you can avoid the 13.6% income tax on your earnings. Apply first for a "C-corp" then apply for "S-Corp" status to avoid the tax.
Q: Where do I report my Etsy sales?
A: File a Federal tax return for any online sales
Q: Why get LLC status?
A: It protects your personal assets in case of a lawsuit.
Q: What if I want to hire holiday help or temporary employees?
A: Hire then as contract employees. Get their social security number and have them fill out a 1099 form. This avoids all the legal issues with having full time employees.
Q: What's the worst that can happen if I don't license my business even if I'm making a profit?
A: Both the state and the federal government can fine you from $100 and up depending on how much income you are hiding. Especially for those of us who are selling online, the government is becoming more and more perceptive of how to regulate online commerce. They are even starting to require that all eBay sellers hold a business license. Etsy may soon be required to give all their seller information over as well so it's growing harder and harder to conceal online commerce.
If anyone has other issues that came up and were addressed at the meeting, feel free to add them! Thanks again, Eric. He is available to help our team members with any small business and tax questions. You can reach him at http://mytaxfriend.com/.
Thanks again, Eric
3 comments:
Very good information
Thanks, Sarah and Eric, this meeting was tremendously helpful! The IRS has more information about Schedule C and C-EZ in publication 334 - it looks like the threshold for needing to file is if your profits are $400 over and above your expenses.
According to the Nevada Secretary of State's FAQ site, it looks to me like sole proprietors earning less than $27,000 annually from a home based business are exempt from the fee for a Nevada business license (but you still have to submit a form). Can anyone who applied recently confirm if this is the case?
Yes. I read that too Priscilla,
On their official site.
I believe that is where a sales tax form comes into effect. I have one
and turn in taxes on monthly basis.
Otherwise why would they post that on their official site? I hope its all true. I need to check with my account on that one too.
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