As Peter noted in a recent post, Keep More of Your Money by Understanding How Taxes Work, working a small side business in addition to your W-2 job can help you make more money as well as save you valuable tax dollars by deducting business expenses using Schedule C. The tax laws for taking business deductions with confidence aren’t complex, but one of the most important of those to keep in mind is that you need to run the business like a business and not a hobby. To show that you have serious business intent, use the following basic checklist (which presumes you will have only one employee, yourself) to make sure you are structuring your small business properly. Note: This list may not be comprehensive since each state has its own requirements.
1. Business License: Many states require licensing of a business. Sometimes the license must be obtained from the state, and other times the city or county will issue it. Many home-based businesses and network marketing ventures do not ordinarily need a license. Check with your state or city government.
2. Fictitious Business Name: If you use a name for your business or sole proprietorship other than that of your own name (which is recommended to protect your personal assets in case of liability lawsuits), you must generally register the company name with the county.
3. Trade Name and Trade Mark Protection: If you want to protect your trade name and any special trade marks that you want developed to brand your business, you will need to file a “Registration of Trademark or Service Mark” with the U.S. Department of Commerce. For further information or to reach the Commissioner of Trademark and Patents, call (800) 786-9199.
4. Copyrights and Patents: If you have developed some special invention or have some written material that you don’t want people to copy, you must file for a patent for invention or a copyright for written materials. This can be done by contacting the Commissioner of Trademarks, and the Patent and Copyright Applications office. Patent registration forms and questions: (800) 786-9199. To obtain copyright forms call (202) 707-9100. If you have a copyright question, call (202) 707-3000.
5. Business Insurance: All businesses should have some form of insurance to cover them from theft of equipment and for liability issues. Most homeowner policies exempt business equipment from their coverage. Check with your property and casualty agent to see how extensively you are covered and what insurance you may need to obtain.
6. Sales Tax Number: In many states, you may be required to collect and remit sales tax. Thus, you should get a sales tax number in the states in which you will be conducting business, especially your home state. Many network marketing companies take care of this for you with the state in which you will be working. If you are joining a multilevel marketing company, check with them about this number.
For more information, contact Money Mastery: 801-292-1099.