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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: isbjshaffer on September 15, 2014, 10:17:20 AM

Title: Should I get a business license?
Post by: isbjshaffer on September 15, 2014, 10:17:20 AM
I've tried doing some online researching and can't find a whole lot about the topic so if you guys know of any please let me know!

Hubby and I have just started reading some Rich Dad Poor Dad books and have both been intrigued by the business idea.

From what I understand, just about anyone can get a business license. Are there any requirements to getting one that I need to know about? The primary purpose for obtaining one would be for tax write offs. I'm not a financial expert by any means, never took any business classes so I don't know much about any of it. I wouldn't really be trying to set up an actual business (though if my blog takes off, that's great!) but if I counted my blog as my business, could I count my mortgage, electric, computer supplies, things like that? Could I purchase property in the name of my business? How does all of this work?

Thanks!
Title: Re: Should I get a business license?
Post by: isbjshaffer on September 15, 2014, 01:12:01 PM
Bump, Does anyone know exactly how handling your investments through a business benefits you over just investing as an individual?
Title: Re: Should I get a business license?
Post by: johnhenry on September 15, 2014, 01:58:05 PM
From the IRS site:  http://www.irs.gov/uac/Schedule-C-%28Form-1040%29,-Profit-or-Loss-From-Business
Quote
Schedule C (Form 1040), Profit or Loss From Business

Use this schedule to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity.

I don't think you need a business license to start a business that makes money and then pay the IRS a portion of what you make. 
Title: Re: Should I get a business license?
Post by: zolotiyeruki on September 15, 2014, 03:33:00 PM
The business license thing is a local (state, county, or municipal) requirement, not a federal one.  So check your local laws.
Title: Re: Should I get a business license?
Post by: iris lily on September 16, 2014, 04:28:17 AM
I've tried doing some online researching and can't find a whole lot about the topic so if you guys know of any please let me know!

Hubby and I have just started reading some Rich Dad Poor Dad books and have both been intrigued by the business idea.

From what I understand, just about anyone can get a business license. Are there any requirements to getting one that I need to know about? The primary purpose for obtaining one would be for tax write offs. I'm not a financial expert by any means, never took any business classes so I don't know much about any of it. I wouldn't really be trying to set up an actual business (though if my blog takes off, that's great!) but if I counted my blog as my business, could I count my mortgage, electric, computer supplies, things like that? Could I purchase property in the name of my business? How does all of this work?

Thanks!

Of course you can't "write off" your mortgage and household expenses to a non-existent business that is (do I understand this correctly?) a blog that makes no money. Did that Rich Dad Poor Dad book lead you to that conclusion? It's a crappy book and yes, I've read it.

In a general answer to your question: if you operate a business out of your home, the I.R.S. expects you to:
The I.R.S. has strict rules in defining what home expenses may be used for a business. It really must be a money making operation, not the hobby you are talking about.

My DH has operated his business from our house for a dozen years, and we don't claim any household expense because it's too complicated, not worth it. We would have to designate one room in our house for his office and use that only for his business. And then, we'd only be able to assign household costs of that one room to a potential tax write-off. It's not worth the hassle and certainly not worth the potential investigation by I.R.S.

Don't be greedy. The author of Rich Dad Poor Dad seems to inflame greed in a lot of his readers. There is no free ride.

And a "business license" has nothing to do the I.R.S. Nothing. The purpose of you getting a "business license" with your municipality or county is to pay a fee to them so that they can recognize, and regulate, the municipal resources that you use commercially.

Read up on operating a sole proprietorship here:

http://www.sba.gov/content/sole-proprietorship-0

Title: Re: Should I get a business license?
Post by: BaldingStoic on September 16, 2014, 03:16:54 PM
Nolo produces a whole series of do-it-yourself legal guides that are very well written.  http://www.nolo.com/legal-encyclopedia/start-own-business-50-things-30077.html.  There are some costs and time implications so you need to make sure it's worth forming a business. If in doubt just start with a sole-proprietorship and defer forming an LLC or Corp until you see the money role in.  Good luck! 
Title: Re: Should I get a business license?
Post by: Greg on September 16, 2014, 06:21:53 PM
I'm pretty sure it's not a business unless you are charging money for a service or product.  Until you have income, even if it's just gross income that results in net zero after expenses, it's not a business.

Reasons to have a business license:
You want to buy materials or other things wholesale.
You want to sell things you make or a service you provide.
You are doing something (see above) that has potential liability, and you need a license to practice.
You need insurance and/or bond relating to the previous item.

In addition to a local business license, you will likely need a state business license and/or a state business registration, not always the same thing.  Then there are IRS filings if you are going to have employees.
Title: Re: Should I get a business license?
Post by: guitar_stitch on September 17, 2014, 11:45:02 AM
A business license is not necessary to have tax write offs.

I operate in the live music/performing arts industry as a side gig.  I am a sole proprietor and claim my income/expenses as self employment.  The only thing special I did was set up a separate bank account for all music related transactions, including paying performers that play with me as subcontractors.  This allows me to have very clear records and a paper trail when I file a 1099-MISC on my performers.
Title: Re: Should I get a business license?
Post by: mozar on September 17, 2014, 08:33:57 PM
On your taxes you don't need to have a business license to declare business expenses, it's called a schedule c. Remember to keep all business expenses separate. If you are making a profit you should consider a business license, which shields your personal income from lawsuits.