Licensing?

[David Somers]

Morning All!!

Just curious. I assume most of us doing business of some sort with our machines are operating under a Business License for our local towns or cities and for the State we are in. I am curious though....for those with licenses....have you chosen to do a sole proprietor license or have you established an LLC for the separation it offers between your business assets and your personal assets? If you chose an LLC did you set yourself up as the registered agent? Or did you go with a commercial registered agent in order to keep your home and personal mailings and phone free of business driven contacts?

Thanks everyone!!

Dave

[Bert Kemp]

Dave When I first got my laser I had delusions of grandeur and becoming a millionaire with my new money generator http://www.sherv.net/cm/emo/laughing/rolling-on-the-floor-laughing-smiley-emoticon.gif and went to the state to get a business license. What I got was a vendors License which allows me to setup a table in any town along with the that towns fee for doing so.My town and many other towns don't charge a fee to set up a table someplace and sell crafts. AZ State License was a whopping $12.Some of the ritzy towns charge a fee .I go online each month and if I sold anything I pay the applicable taxes.If not I file $00.00.I renew it each year since its free to keep LOL so why not. I think in the 4 years I have had my laser I have sold maybe $1000 worth of stuff, givin away yikes I can't even imagine. Glad I don't have to pay for all the stuff I give away.

[Kev Williams]

My dad set our biz up as a partnership, and I've never changed it. In many cases, it's not smart because of personal liability issues. However, there's nothing to do with my business that would cause me to get sued, aside from someone falling down on my property, and there's no 'negligence' issues with that- I shovel snow, salt the ice, there's no tripping hazards... As for the biz proper, I don't sell or produce any type of product or service that could potentially hurt someone (baby cribs, car seat, chairs, walking sticks, lotions, cleaners, etc.), I don't own rental property that renters can burn down with a grease fire and blame me because of a faulty stove, nor do I sell or produce any type of food product that could cause someone to get sick or contract e-coli or hepatitis or whatever. My liability is the cost of people's merchandise should I mess it up. Over the years our partnership has changed, typically partner's % of ownership, and actual owners as my parent's health and eventual passing dictated. Any changes requires no 'lawyer-necessary' legal paperwork of any kind. Simple paperwork explaining the partnership and owners, signed by the owners and a witness is all that's ever needed. No tax issues with changes, and partnership returns are easy. We've never had employees, that's helped keep things easy. Partnerships are very simple money-in-money-out businesses; I collect sales income, I pay business expenses, what's left over is personal income...

I've been threatening for years to change to an LLC, or even an S-Corp to help save on self employment tax, but that money just goes into my SS account so I've just left well enough alone. :)

[Gary Hair]

A business license and how you form your company are to separate issues. The license is typically for your city or state and is for local tax purposes, the formation of the company is usually for federal tax (and liability) purposes. Oregon doesn't have sales tax and doesn't require business licenses but we still have to register with the state. I decided on an LLC but am taxed as a s-corp, so that I can get the most benefit tax-wise. I have my attorney handle the registration as well as the annual report, one less thing for me to worry about! As for the formation of the company - check with your attorney and CPA, they can give you the pros and cons of the various entity types and what is best for your situation.

[David Somers]

Afternoon Gary and Kev and Bert!

Sorry for the confusion. I did mix my terms. I am licensed with the City for a business license and with the State and as a Sole Proprietor. My tax folks had strongly suggested I look into establishing an LLC (or maybe an S Corps though that was less likely) solely for the purpose of isolating my personal assets from the "business" should something untoward happen. It is unlikely I would ever hire someone for what I do, which is mostly craft and art fairs, and eventually Etsy or other online sales. I am not hiring out to do services to other companies like many here do. This is a small retirement business and if it pays for my travel and materials that is fine. Anything beyond that is a bonus. So far it has gone quite well and for December I nearly covered the cost of the laser. (woohooooo! <grin>)

In looking at setting up an LLC or an S Corps I noticed you needed to have a registered agent. That is the person who will be available during working hours to accept calls and documents and accept court documents if needed. You can designate yourself as the agent but I have been warned by a number of people to actually hire an agent service to do this so that your "LLC business" does not show publicly as being at your home physical and mailing address.

That was why I was curious what you all were doing? My tax folks didnt seem too concerned about an S Corp so much as gaining the asset protection of an LLC structure.

[Joe Pelonio]

I was a sole proprietor for 16 years, state and city licenses combined were $15/year. Some other cities require a separate license to do business there, but if your customers pick things up and install themselves there is no need.

[David Somers]

Thanks Joe! As I was saying. So far this is all craft fair and art show items. Christmas ornaments lasered and turned, turned bowls and vases and pens along with more artsy stuff on the lathe, (old turners saying....if it don't hold soup its art!). Stuff like that. Sold on site at fairs and shows, and maybe on Etsy or a similar service. Don't know that I would ever get into production work like many of you folks do, but you never know.

Mostly, just looking to protect our assets so I don't end up living with the Troll under the Fremont Bridge. My wife would be a tad annoyed. My dog wold probably love it though so not all bad!

Pondering pondering!

Dave

[John Lifer]

I thought about it too as I'm planning to make some sort of paying business out of this work in the next few years. Decided on a name, and as I'm theoretically broke, decided while figuring out Arkansas' business license procedure, that I'd stay as a sole proprietorship. Business license was $25, and I'll pay the county tax only as I'm just outside the closest town. ( 2% city tax is steep!). I don't have a true storefront, if I ever progress to that point I'll probably change to LLC. More liability from that point I expect.

[Matt McCoy]

Mostly, just looking to protect our assets...

LLC or S Corp would be the way to go for this. Both offer protection and likely tax advantages over a sole proprietorship. In some cases LLCs can also file as an S Corp, taking advantage of its benefits, without as much of the record keeping and accounting burden.

[Gary Hair]

In some cases LLCs can also file as an S Corp, taking advantage of its benefits, without as much of the record keeping and accounting burden.

Yep, that's exactly how I am setup.

[Kev Williams]

An S-corp will have tax advantages in the form of less self employment taxes, has to do with the amount of income based on the wage you pay yourself v. money paid to you for 'the use of capital' or whatever- might be other bennies too, someone besides me may better explain because I don't fully understand, and because I don't is why I've never went S-corp. Another reason for avoiding S-corp is I've always figured the extra SE tax I [hate to] pay--which is actually MY money and adds to my SS account- would be just about equal to the what I'd spend on lawyers and accountants to keep track of it, and THAT money is gone forever.

An 'basic' LLC, as I understand it, has no tax advantages over a partnership or sole proprietorship, because they're all 'money in minus money out equals money taxed' business types. The ONLY difference as I understand it, is the liability protection it affords- and the possible need for lawyers and accountants, neither of which my folks or myself have ever spend a nickel on since 1966.

If your state collects sales taxes, you'll have to get registered and get a state tax number. And if your state collects property taxes, you'll likely be getting a form to fill out from them for you to list your business assets so that you can pay property tax on them. Depending on sales taxes, there's the W9's to have companies reselling what you're engraving fill out, and you get to fill out W9's from your vendors to avoid sales tax on what YOU buy to resell. And you should get a federal Employee ID number, even if you never have employees. All of this is typical no matter what type of type of business you choose to run...

[Jeff Body]

My business is filed as a LLC but it's treated just like a sole proprietor. If you only have 1 person in your business and you register as a LLC you're automatically set up as a LLC Sole Proprietor. At least that's how it is in FL.

I'm treated just like Kev stated, Money IN - Money Out = Income.
I have all the protect of an LLC.

This is how I'm setup but I'd suggest checking with a CPA or Lawyer.

[David Somers]

Thanks everyone!! Appreciate all the feedback and experiences!

[Tim Bateson]

I took a different route, and grew into it. I spend several years doing this as a "hobby", then got a state Vendor License as the business was growing, and for the tax benefits. Then a couple years ago re-organized as an LLC due to the amount of work, & broad industrial customer base which includes the US government. This all prepared me for when I applied for my Federal Fire Arms Manufacturer License (FFL Type 7).

[Matt McCoy]

Might have missed it, but collecting and reporting sales tax is probably worth mentioning, if required. Bigger shows usually ask for a sales tax permit. I'm sure you have one, but just in case.

[David Somers]

Thanks Matt! I do have a business license so I am covered that way. Was just looking at whether I should be going into an LLC to protect personal assets from the "business."

[Tim Bateson]

... Was just looking at whether I should be going into an LLC to protect personal assets from the "business."

Depends on your business model. If you are selling hobby items at flea markets, then no. If your goal is industrial/commercial business than an LLC gives you a more professional image. Some customers prefer to deal with what they perceive as an established business rather than a hobbyist. Also, don't forget to get a real website/email that is associated with your business. I know this will offend some, but I myself do not take seriously when a "business" gives me an email address with @gmail.com, @hotmail.com, @yahoo.com... The cost is minimal for a great return.

[Bert Kemp]

FWIw you can set up a mail account with a .com website to forward mail to yahoo or the others. Like Mywebsite.com will then forward to myyahoo.com.



Depends on your business model. If you are selling hobby items at flea markets, then no. If your goal is industrial/commercial business than an LLC gives you a more professional image. Some customers prefer to deal with what they perceive as an established business rather than a hobbyist. Also, don't forget to get a real website/email that is associated with your business. I know this will offend some, but I myself do not take seriously when a "business" gives me an email address with @gmail.com, @hotmail.com, @yahoo.com... The cost is minimal for a great return.

[David Somers]

Thanks Tim!! I do already have a domain and email, along with a phone number specifically for it so that is covered. And have registered the business name so that is reasonably protected. Was mostly deciding if there is enough exposure to warrant protecting personal assets with an LLC. Am getting lots of mixed advice on it. Has been interesting. Have an appointment soon with SCORE and will see what their thoughts are.

I will let folks know what transpires and why when I get there. Thanks for all the advice and thoughts!!!

And....in case I dont talk to any of you before the 1st! Hope you all enjoy a wonderful and safe and happy New Year!!!

[Tim Bateson]

I used legalzoom for my LLC.