# Do you have to declare yourself a business?



## Aro5389 (Feb 11, 2008)

If me and my buddy wanted to make our own shirts and sell them, and split the profit 50/50, isn't that like selling on eBay almost? Do we have to declare ourselves as a business and file all those confusing forms and what not?


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## 2STRONG (Oct 17, 2007)

im not sure on that but i know if you are making any kind of money the goverment always wants a piece of that. if you are going to do that i would suggest you do it the right way and fill out the forms they are not that hard and you could have your sellers permit today your DBA (busines name) along with everything else you need.


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## cancelledbyrequest (Jul 18, 2007)

Yeah you do and besides a seller's permit cost only $35.00, so its not like pulling teeth.


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## cancelledbyrequest (Jul 18, 2007)

Use legal zoom


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## prometheus (Oct 19, 2006)

One thing to look at as well, if you go about the proper chanels, you can also write off a lot of things in your taxes.


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## cancelledbyrequest (Jul 18, 2007)

prometheus said:


> One thing to look at as well, if you go about the proper chanels, you can also write off a lot of things in your taxes.


Yep that is so True.


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## MoustacheKC (Mar 19, 2007)

Official answer: Yes. Generally, state law (depending on the state) requires all entities that transact business to be licensed or registered--mostly for tax purposes and regulatory controls. As with anything, the more time/money you spend on formalizing your business (internally and externally), the more protected you'll be from the everyday trials and tribulations of business (i.e., financial liabilities, lawsuits, partnership risks, etc.). 

If you are intending this to be something on the side to make a little extra cash in the short term, it's probably not worth the effort. But just remember--when it comes to doing things the "right" way from the very beginning--an ounce of prevention is worth a pound of cure. The last thing you want is to become a success, and then have it compromised by lack of basic planning and due diligence. 

Good luck!


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## chance_b (Sep 13, 2006)

Personally, I'd consider it just a "hobby" during the whole startup period. If you plan on continuing on with things and growing it all into a real business, register yourself at that point, but no sooner.

I made the mistake of registering here in Canada before I was ready.. cost $60-something, and then I ended up not actually going anywhere with it. When the government started wanting tax forms sent in, I called and canceled the business. Now that I'm doing things again, I'm waiting until I'm roughly established to bother going official.


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## Aro5389 (Feb 11, 2008)

chance_b said:


> Personally, I'd consider it just a "hobby" during the whole startup period. If you plan on continuing on with things and growing it all into a real business, register yourself at that point, but no sooner.
> 
> I made the mistake of registering here in Canada before I was ready.. cost $60-something, and then I ended up not actually going anywhere with it. When the government started wanting tax forms sent in, I called and canceled the business. Now that I'm doing things again, I'm waiting until I'm roughly established to bother going official.



That's what I want to do. But at what point does it become illegal and you must register as a business?


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## chance_b (Sep 13, 2006)

I'm not sure if there is a definitive line as to when it becomes illegal, though someone else on the board may know better than I do. If not, you can check in with whatever branch of your local government handles this stuff (once again, other members could maybe be more specific). I have a feeling though that almost anyone you talk to will tell you it's flat-out illegal altogether.. in that case, it would become more of a moral decision on your part.

For me, I'll probably give it the rest of this year, or at least until I have everything in place and have made however many sales.. whichever comes first.


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## Girlzndollz (Oct 3, 2007)

Aro5389 said:


> But at what point does it become illegal and you must register as a business?


At the point in which you sell something.  Seriously, in some states you don't need to finish filing for your numbers and forms right away, but must be done by tax time. Contact your local acct for more info.

When you generate income, you're expected to pay income tax on it. But, as mentioned, you get to write off your expenses, so you may not actually generate income in the beginning. If you are a sole proprietor, your losses pass through to your personal income tax and reduce your burden there. I can't say what the status is for partnership as the OP's may become.

But, as always, any and all tax advice should come from a chat with a local accountant or CPA who will usually give you some free phone time (I got some), in hopes you will return to them for processing your taxes and for your other needs.

If you track your income and expenses from the beginning, it does not get overwhelming. Weekly is a good way to start. Just clip sales numbers and the expenses together and write the net total for the week on the sheet.

Also, if you live in a state in which sales tax is collected on clothing, you will need to deal with that.

Most wholesalers will want you tax id # so they may sell to you wholesale. I live in a state that does not charge tax on clothes. But I wonder the implication with buying wholesale, and then selling and not charging/submitting sales tax in a state that collects it.

Net profits from Ebay are subject to income tax.

There is a hobby status, I don't know anything other than it exists. Check with your local acct/cpa for info on your area.

Contact your local Small Biz Development Center for help if you are lost or confused, it is free and they are there to support you.
Small Business Administration - sbdc_locator_map


Good luck to all!


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## prometheus (Oct 19, 2006)

I'm not certain, but I think you can make under $500, before the government wants you to look into being a "business" or a t least claim it. One way to think of it is like this: Hobbies don't make money. 

Last year I spent more than I earned (getting started). Whatever I am in the hole for this year, I can take off my taxes next year. This year I was able to score another $500 or so from my taxes because of write-offs. I think a lot of CPA's would tell you take turn a hobby into a business.


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## TripleT (Apr 29, 2007)

chance_b said:


> Personally, I'd consider it just a "hobby" during the whole startup period.


I don't think a partnership can be considered a hobby.


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