# running my company as an individual



## capnb (Jan 23, 2013)

Do I have to be a sole proprietorship or can I simply run my clothing company as an individual and at some point become a sole proprietorship or LLC?

Just a little confused.
Thanks!


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## Silky49 (Aug 1, 2012)

dont make more than $1000 in transactions to yourself. Youll be redflagged by the IRS.

But yes. I am doing it now and Ive seen other companies who do the same thing. You register with the state under your name and SSN then go and get a DBA as your clothing company.


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## capnb (Jan 23, 2013)

Silky49 said:


> dont make more than $1000 in transactions to yourself. Youll be redflagged by the IRS.



So you're saying just make sure I have a DBA and my tax number, etc. But it's OK if I'm not a sole proprietorship or llc for now?

Thanks!


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## mmonk (Oct 23, 2011)

capnb said:


> So you're saying just make sure I have a DBA and my tax number, etc. But it's OK if I'm not a sole proprietorship or llc for now?
> 
> Thanks!


You area sole proprietor even if you don't go the legal route and get tax ID, DBA or resale certificate. The only difference is whether you call your self "John Smith's Company" or "awesome got my licenses in order clothing Co." Thats where the DBA comes in.


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## capnb (Jan 23, 2013)

mmonk said:


> You area sole proprietor even if you don't go the legal route and get tax ID, DBA or resale certificate. The only difference is whether you call your self "John Smith's Company" or "awesome got my licenses in order clothing Co." Thats where the DBA comes in.


I guess why I'm confused is I recently filed for an intent to use trademark (I know, most people would have waited, but I really wanted to get the ball rolling) and I chose "individual" on the form (instead of sole proprietorship)...curious why that would even be an option if you're registering a business's trademark.

Thinking I should have done the sole proprietorship first (at least) because there is like a $50 fee to transfer the trademark if I have to...I dunno. Still learning this stuff I guess


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## capnb (Jan 23, 2013)

So basically I have to have a DBA if I am an individual running a clothing line that is not my name (call it BUTTON clothing company)...otherwise I legally can't be operating (taking sales, etc) as that company? Is that correct?

All of the sudden I am just really confused about this.
And mad that I didn't realize that before I filed with the uspto.

Also, my company will be online only.
Does that make a difference? 

(I am most likely moving out of state this year and I feel like it is going to make things super complicated changing DBAs, changing the info on my trademark registration, etc etc)


Thanks guys....I appreciate any help


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## GordonM (May 21, 2012)

I'm not following some of the responses here, but I think you may be getting confused because you're mixing-and-matching IRS, state resale, and local business DBA. It's important to separate them:

1. Unless you form an LLC you will file your income tax as a sole proprietor. This is how you will be listed with everyone who asks for your tax information.

2. You do not need a DBA or LLC to start or run your business.

3. In most states, you only need a DBA if your company name is wholly fictitious. Use your surname instead. Example: If your name is John Smith, you generally do not need a DBA if your company is called Smith Shirts.

4. The IRS couldn't care less about your DBA. If you must file state income tax your state doesn't care either. 
Your bank cares if you want to open an account under your DBA.

5. Except for the IRS or your bank, avoid filling out paperwork with your personal SSN. Get a free EIN from the IRS. You can use 'John Smith Shirts' as your company name, even if your brand ends up being called something else.

6. In most states you must get a resale certificate (AKA license, permit, etc.) before you can start conducting business. Many offer it for free, and some let you do it all online. You need this because you must collect sales tax on orders sold to customers in your state, and then turn that tax over. You will want this resale permit in order to get the best wholesale pricing, and avoid paying sales tax on items you purchase locally within your state, and intend to resell.

7. In most states, you cannot "legally" begin operating under a DBA until you have performed the due diligence required, filed with your city or county, and published the necessary notice. You certainly can't collect money under it, because banks and others will want to see your DBA before opening the account.

8. In some cities you'll also need a business license, and you may be operating outside the law if you conduct business without one. In some areas, a home-based business that receives no customers, uses no dangerous chemicals or processes, and has no employees doesn't require a license. You have to check to be sure.

The above is not legal advice.


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## capnb (Jan 23, 2013)

GordonM said:


> I'm not following some of the responses here, but I think you may be getting confused because you're mixing-and-matching IRS, state resale, and local business DBA. It's important to separate them:
> 
> 1. Unless you form an LLC you will file your income tax as a sole proprietor. This is how you will be listed with everyone who asks for your tax information.
> 
> ...


Thanks for the info!
This is just a lot more complicated then I initially thought.

If my name is John Smith but the clothing line I am starting is called "Button Clothing" (unrelated to my legal name) do I then have to to have a DBA to start and run my clothing line?

If not, can I have an ein for "Button Clothing" that I use for tax purposes, etc instead of a DBA?

This will be an online store. I will have no emplyees and I will only be selling clothing (I will not have a physical retail store). Does that changes any of the state requirements or anything or no?

Essentially I am an individual. I will be starting an online clothing brand where I will have clothing pieces made and I will sell them in an online store. (Just to lay all that out).

I'm just stressed because I will most likely be moving out of this state this year and I already know I'm not going to want to do all of this again. But I want to make sure that everything legit when I launch..

sorry for the long messages and thanks so much for your help!


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## GordonM (May 21, 2012)

capnb said:


> Thanks for the info!
> This is just a lot more complicated then I initially thought.
> 
> If my name is John Smith but the clothing line I am starting is called "Button Clothing" (unrelated to my legal name) do I then have to to have a DBA to start and run my clothing line?
> ...


Marked up as above.


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## capnb (Jan 23, 2013)

GordonM said:


> Marked up as above.


Thanks again!
I think I just need to get the DBA and figure out the state stuff from here


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## amdivoff (Jun 6, 2012)

Keep in mind with just a DBA if you are sued they can go after your belongings. A single owner LLC under IRS youre a sole proprietorship and personal belongings are protected.


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## capnb (Jan 23, 2013)

amdivoff said:


> Keep in mind with just a DBA if you are sued they can go after your belongings. A single owner LLC under IRS youre a sole proprietorship and personal belongings are protected.


If I'm sued under what circumstances?


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## amdivoff (Jun 6, 2012)

A person gets a rash from your shirt and files bougus lawsuit. (US is frivolous lawsuit country)
If your "business" is sued there is no seperation between you and the biz as a sole proprietorship so your belongings are company assets. LLC, there's a seperation of company and individual Even though the IRS views a one member LLC as a sole proprietorship.


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## Printavo (Oct 7, 2007)

I wouldn't worry about paying for an LLC or worrying about that. Just do a DBA.


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## amdivoff (Jun 6, 2012)

99 bucks plus state fees @ legalzoom.com. super easy and quick.


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## capnb (Jan 23, 2013)

amdivoff said:


> A person gets a rash from your shirt and files bougus lawsuit. (US is frivolous lawsuit country)
> If your "business" is sued there is no seperation between you and the biz as a sole proprietorship so your belongings are company assets. LLC, there's a seperation of company and individual Even though the IRS views a one member LLC as a sole proprietorship.


That seems kind of unlikely...I'll probably get the DBA then do an LLC somewhere down the line


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## ELTS (Jan 16, 2013)

I only read a couple of these posts so if I am double covering, sorry.

Also, this is just friendly advice and not meant to be tax advice or replace any laws or guidelines that your home state may have in regards to this issue.

The terms sole proprietor, LLC, S corp, C corp are mostly for tax purposes.

A DBA is a separate issue.

When you start a new business as a single owner you are by default considered a sole proprietor. You will use your own social security number as your tax ID number. When your company makes money it is reported under your own social at the end of the year on a "schedule C" tax form. A DBA is simply a form to let the powers that be know you have an assumed name you are operating under.
The ONLY people that I have showed my DBA to was the bank when I opened the business account.

As a "sole pro" you also take on the liability issues connected with being in business. Let's say you have a part time college kid cleaning screens on Saturday morning. He slips on the wet floor and breaks his leg. He developed gang green and has it amputated. WHEN he sues you, ALL of your personal assets are fair game. Personal bank account, house, IRA's, pensions, the boat, etc...

This is one of the main reasons people elect to incorporate. An LLC is a form of corporation. Limited Liability Corporation.

When your business becomes a corporation, it takes on it's own identity. You, as the owner become an employee of that corporation. If someone sues it, you personally are not involved.
Generally speaking.

Taxation is the other reason. There is absolutely NO reason to consider it unless you are making over $100K.

Any other questions, let me know.

Hope this helps.


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## capnb (Jan 23, 2013)

ELTS said:


> I only read a couple of these posts so if I am double covering, sorry.
> 
> Also, this is just friendly advice and not meant to be tax advice or replace any laws or guidelines that your home state may have in regards to this issue.
> 
> ...


Thanks for the info!
I plan on getting a dba and an Tax ID number so I do not have to use my own.

I won't have any employees, so I don't think I'll have to worry about any lawsuits in the near future.

What is confusing me is that last month I applied for an intent to use trademark. I put "individual" but "Sole proprietorship" was also an option. Why would that even be an option?

And what you're saying is to stay a sole proprietorship until I start making more money? Are there any tax advantages of an llc if you're just starting out?

Thanks agian


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## ELTS (Jan 16, 2013)

capnb said:


> Thanks for the info!
> I plan on getting a dba and an Tax ID number so I do not have to use my own.
> 
> I won't have any employees, so I don't think I'll have to worry about any lawsuits in the near future.
> ...


An "individual" would be someone who doesn't have a business but wanted to get the trademark.

Employees aren't the only ones who can sue you.

I don't believe there are any tax advantages to an LLC. Talk to a tax accountant about that one.


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## capnb (Jan 23, 2013)

ELTS said:


> An "individual" would be someone who doesn't have a business but wanted to get the trademark.
> 
> Employees aren't the only ones who can sue you.
> 
> I don't believe there are any tax advantages to an LLC. Talk to a tax accountant about that one.


So what you're saying, in your opinion, is the only benefit to an llc if you're not making tons of money is so people don't sue you?


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## ELTS (Jan 16, 2013)

capnb said:


> So what you're saying, in your opinion, is the only benefit to an llc if you're not making tons of money is so people don't sue you?


Generally speaking yes. You can do a google search on LLC and find any other benefits. But yes, this is why you would incorporate. 
A) Protection against personal assets
B) Tax savings on larger amounts of money
C) The ability to perform and carry on business as usual in the event of an untimely demise of the principal business owner. When you incorporate, you need to assign officers to various positions. I believe a minimum of 3. Kinda like a board of directors. If you, as the business owner dies, they can elect a new president and the corporation will still survive your death. As a sol pro when you die, so does your business. generally speaking.


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## ericsson2416 (Aug 29, 2007)

With a LLC you and your business are the same in the eyes of the IRS for taxes (this is good because you are only taxed once). Within the LLC you are "separated" from your personal assets. Highly recommend forming one. It's fairly inexpensive and yeah - rash from shirts, you side swipe a car while delivering shirts, someone trips over a power cord - any crazy, small, minor, trivial thing could happen whether you are negligent or not and they can still sue you and your assets (nothing says they would win). I always looked at it as a minor cost considering the overall risk. Better safe than sorry.


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## capnb (Jan 23, 2013)

Slightly off topic...but when/where do you also need a resale license/certificate? I live in NY...can't find any info on it anywhere.
Talked to the county clerks office, they had no idea.

I'm confused...


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## ericsson2416 (Aug 29, 2007)

Check with your state licensing department. You'll need the resale certificate for some shirt wholesalers so they don't charge you tax on your purchases.


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## capnb (Jan 23, 2013)

ericsson2416 said:


> Check with your state licensing department. You'll need the resale certificate for some shirt wholesalers so they don't charge you tax on your purchases.


Ya, from what I can see that is the main reason to get one.

But do you legally need one? Just curious


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## ELTS (Jan 16, 2013)

Your resale certificate is dealing with sales tax. Yes, you do need one. You need to collect sales tax, and then pay it to your state. Also when you buy shirts from your supplier, they will charge you sales tax if you don't have a "resale" certificate. They won't charge you tax because when you sell the shirts you will collect it then.


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## ericsson2416 (Aug 29, 2007)

No, you can purchase your shirts from jiffy shirts or other sites without one.


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## ericsson2416 (Aug 29, 2007)

You don't have to a resellers to collect sales tax. That's part of having a business license. The resellers permit is so you don't have to pay sales tax on items you will be reselling. Here's the info. from our state: http://dor.wa.gov/Content/FindTaxesAndRates/RetailSalesTax/ResellerPermit/default.aspx


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## ELTS (Jan 16, 2013)

ericsson2416 said:


> You don't have to a resellers to collect sales tax. That's part of having a business license. The resellers permit is so you don't have to pay sales tax on items you will be reselling. Here's the info. from our state: Using and accepting reseller permits


It must depend on your state. In Texas you most certainly do. How do you pay the tax to the state? And, how do they track it with no number?


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## capnb (Jan 23, 2013)

ELTS said:


> It must depend on your state. In Texas you most certainly do. How do you pay the tax to the state? And, how do they track it with no number?


An EIN or a ss if you're an individual acts as your "tax number".


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## capnb (Jan 23, 2013)

ericsson2416 said:


> You don't have to a resellers to collect sales tax. That's part of having a business license. The resellers permit is so you don't have to pay sales tax on items you will be reselling. Here's the info. from our state: Using and accepting reseller permits


OK...now I'm confused again. haha.
So there is a DBA, a business license, a resellers certificate, an EIN...and theyre all different?

Where do I get a business license? I'm on the New York Licensing website and I don't see anything about it.
Is a DBA and a business license the same thing?

Sorry...I know these are stupid questions...I just can't seem to get the info from the people at the state here...

These are the only things that the site says need licenses:

http://www.dos.ny.gov/licensing/index.html

I don't see anything for just generic business..or clothing :/


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## ericsson2416 (Aug 29, 2007)

Yes, confusing!

In our state the business license and DBA are the same. Our DBA names are listed on our state issued business license. Screen printing for us is listed not under a specific category but just professional services. The resellers certificate is applied for but also issued by the State (that's how it works here). The EIN is issued by the IRS as an Employer Identification Number. You can get one even if you don't have employees so you aren't using your social security number when dealing with vendors or filing out forms to be a vendor (like for a school district). You'll need a business license to get one. 

I didn't see anything on that state website that would help. I'd call first thing in the morning.


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## capnb (Jan 23, 2013)

ericsson2416 said:


> Yes, confusing!
> 
> In our state the business license and DBA are the same. Our DBA names are listed on our state issued business license. Screen printing for us is listed not under a specific category but just professional services. The resellers certificate is applied for but also issued by the State (that's how it works here). The EIN is issued by the IRS as an Employer Identification Number. You can get one even if you don't have employees so you aren't using your social security number when dealing with vendors or filing out forms to be a vendor (like for a school district). You'll need a business license to get one.
> 
> I didn't see anything on that state website that would help. I'd call first thing in the morning.


I actually got an EIN for something else a couple years ago. Didn't need a business license or anything.

That's why this is confusing.
No one from any state department I've called knows what I need...and everybody I've talked to has mixed opinions...

I don't know why it is so hard to do things the right way here :/

Either way I will be getting a DBA and an EIN...beyond that I'm still lost.

I'll try to contact some more people

BTW...several wholesale sites/companies that I've seen only requires an EIN and a business name...so I still don't get what the point of a resale license is...


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## ericsson2416 (Aug 29, 2007)

Oh man, sorry its so confusing. Just looked at our resale certificate and it has a separate number issued by the state and is issued to our business number tied to our business license. Yeah, every state must be different. I know some states combine their business license and resale together. The resale certificate should be what gets you being able to buy items without having to pay sales tax.


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