Before you make sales as a business, you need a couple of things in place. Here’s a checklist of basic steps for setting up your business to avoid future problems with the IRS and to make your gig operate more smoothly.
__ Choose a Name for Your Business
Your business needs a name that is short, catchy, memorable, and doesn’t already belong to someone else. Many makers use their own name as their business name.
A Google search is usually a good place to start. If Google doesn’t return a link with your ideal business name, next check for registered trademarks at
www.uspto.gov/trademarks/process/search/.
If you don’t find your prospective name registered as a trademark, then do a business name search in your state. Do this by searching the phrase “business name availability (your state’s name).” Usually, this search will bring up your state’s business filings bureau where you can learn if anyone else is already using the name you have in mind.
__ Legal Requirements: Permits and Licenses
For most businesses that don’t sell food or alcohol, there are usually four registrations or permits you need to operate legally in the US:
Zoning permit waiver. Most side gigs or small startups will be run from home, which is more than likely in a residential area. Your home probably isn’t zoned for doing business. However, you may still be allowed to operate with a zoning waiver as long as your home business activity doesn’t draw attention or get complaints from neighbors. Visit your city or county zoning office to learn what’s required.
Local business license. Apply at your local county business registration office. Locate yours at:
sba.gov/business-guide/launch-your-business/apply-licenses-permits.
State sales tax permit. In the US, except for Alaska, Delaware, Montana, New Hampshire and Oregon, all states require a state sales tax permit for selling products or services in the respective area. To learn where to get a sales tax permit in your state, do an online search for “(your state name) sales tax permit.” Usually the state sales tax permit is free. Once you are signed up, the state will send you forms to fill out and return with any sales tax collected. If you will sell at festivals and art and craft shows, most events require a state sales tax permit.
Federal Employer Identification Number (EIN). If your business doesn’t have employees, you may not need an EIN. Sole proprietors can use their social security number when reporting business income to the IRS. If you hire others, you’ll need the EIN. Apply online at
ein-forms-gov.com/.
___ Accepting Credit Card Payments
When selling at events, a mobile credit card reader allows you to accept credit card payments through your mobile phone or notebook.
If you plan to sell on Etsy or Amazon Handmade, you won’t need a credit card processor as the site handles transactions and passes on the processing fee to you. If you have your own website, you will need a credit card processor to handle transactions from online sales.
Two popular mobile credit card service providers among craft show vendors are Square at
squareup.com and PayPal at
https://www.paypal.com/us/webapps/mpp/credit-card-reader. Both services allow you to accept credit card payments through your smartphone with no monthly charges and only a per-transaction fee. Money from a sale minus the fee is deposited directly into your checking account.
__ Keeping Records / Accounting
Keep records of your sales along with your expenses. The IRS requires businesses to keep records and file income tax, even when you don’t show a profit.
There are different ways of keeping records. If you have a smartphone, there are apps like
Expensify that allow you to snap photos of your receipts. If you prefer to make entries by hand, log books for tracking expenses can be found at office supply stores and bookstores.
TaxJar integrates with Etsy shops making it easy to record sales data. Other accounting tools include:
Wave,
QuickBooks Self-Employed,
GoDaddy Bookkeeping for Etsy Sellers, and
Zoho.
Examples of expenses you may be allowed to deduct from your business income include: business-related insurance, show rental fees, bank charges, trade periodicals, advertising, office supplies, utilities, contract labor, salaries, equipment rentals or repairs, depreciation, and the cost of goods sold.
For more tax advantages from your craft business, see How to Price Crafts and Things You Make to Sell.
__ Start a Production Logbook
Keeping a production logbook helps when it comes time to reproduce an item. In my logbook, I include a photo or drawing of each piece with details of material costs, production time, finished dimensions, how well an item sold, and other notes.
https://tedwoodplans.com/offer/?a=craftsart&tid=track” target=”_blank”>How to launch your own woodworking business for under $1,000 and make $90,000 to $150,000 a year with easy wood crafts to make and sell. As seen on TV, Yahoo, AOL, Entrepreneur, CNN, USA Today and more. 