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You have a good home business idea. What?s next?
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So, you want to start your home-based business. You have an
idea. But do you know where to start???? That?s important to
start with the legal aspects of running a home-based business:
business registration and taxes.
The first thing you should consider is choosing an appropriate
form of business. From a legal point of view, there are four
types of businesses: 1.Sole proprietorships (This is the
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business and is directly responsible for its debts.)
2.Partnerships (A form of business entity in which 2 or more
co-owners engage in business for profit. For the most part, the
partners own the business assets together and are personally
liable for business debts.) 3.Corporations (A corporation is a
legal entity that is separate from its owners, the shareholders.
No shareholder of a corporation is personally liable for the
debts, obligations or acts of the corporation.) 4.Co-operatives.
(A co-operative is a corporation organized and controlled by its
members, who pool resources to provide themselves and their
patrons with goods, services, or other benefits.) I think in
most home business cases the most suitable is sole
proprietorship.
A sole proprietorship is a business entity owned and managed by
one person. The sole proprietorship can be organized very
informally, is not subject to much federal or state regulation,
and is relatively simple to manage and control.
REGISTERING YOUR SOLE PROPRIETORSHIP
Unlike an LLC or a corporation, you generally don't have to file
any special forms or pay any fees to start working as a sole
proprietor. All you have to do is declare your business to be a
sole proprietorship when you complete the general registration
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many counties require businesses - even tiny home-based sole
proprietorships - to register with them and pay at least a
minimum tax. In return, your business will receive a business
license or tax registration certificate. You may also have to
obtain an employer identification number from the IRS (if you
pay wages to one or more employees), a seller's permit from your
state (If your business involves selling taxable goods or
providing a taxable service such as renting goods or fabrication
labor) and a zoning permit from your local planning board (for
construction business). And if you do business under a name
different from your own, such as Custom Coding, you usually must
register that name -- known as a fictitious business name --
with your county. In practice, lots of businesses are small
enough to get away with ignoring these requirements. But if you
are caught, you may be subject to back taxes and other penalties.
TAXES In the eyes of the law, a sole proprietorship is not
legally separate from the person who owns it. The fact that a
sole proprietorship and its owner are one and the same means
that a sole proprietor simply reports all business income or
losses on his individual income tax return ? IRS Form 1040 with
Schedule C attached. More information about IRS Form 1040 and
Schedule C you can find at http://www.irs.gov .
As a sole proprietor, you'll have to take responsibility for
withholding and paying all income taxes, which an employer would
normally do for you. This means paying a "self-employment" tax,
which consists of contributions to Social Security and Medicare,
and making payments of estimated taxes throughout the year.
About the author:
Arina Nikitina operates Home Business Resources
(http://homebizinfo.8m.com/). There you can find everything you
need to know about Internet marketing, website promotion,
affiliate programs and more. Hundred of FREE e-books, two
hundred of articles, free guides and tutorials, business
consulting and more. http://homebizinfo.8m.com
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