![]() Name registration takes place with the state or county clerk. I n most states, a business operating under a name that is different from the owner’s full first and last name will need to register for a DBA (sometimes referred to as a Doing Business As name, Fictitious Business Name, Trade Name, or Assumed Name). ![]() Many craft businesses operate as a sole proprietorship, because their liability risk is pretty low, but may need to register for their business name. Learn more about the different types of business entities. The LLC is more expensive than the sole proprietorship and partnership but is typically quite low and worth the liability protection. Limited Liability Company (LLC)Īn LLC or Limited Liability Company provides the liability protection of the corporation but doesn’t have many of the same administrative requirements. The corporation is created by filing paperwork (typically called the Articles of Incorporation) with their state’s entity formation office, which is typically the Secretary of State. All of this has to be done, even in single-owner corporations, in order to keep the liability protection. The corporation is more expensive to create and maintain and also comes with requirements such as issuing shares of stock, having a board of directors meeting, shareholders meeting and, taking minutes at the meetings. Instead of the business and owner’s being intertwined, the corporation is a separate legal entity, so if the business is sued, the owner’s personal assets are protected in most cases. Just like the sole proprietorship, if the business is sued, ALL of the partner’s personal assets are potentially at risk! CorporationsĬorporations are a business structure that is much different from the previous two. The income that is generated from a general partnership is subject to self-employment tax and does not pay tax through business income but instead personal losses of the group making up the general partnership. This entity is similar to a sole proprietorship in that there isn’t a formal filing requirement in most states. General PartnershipsĪ general partnership is when a group of two or more people go into business together. While this risk is low, it is worth mentioning. This means if the business is sued, the owner’s personal assets are potentially at risk. There is one huge downside to consider, which is a lack of liability protection. The sole proprietorship is the easiest and least expensive structure to form as there is no official filing to create it. Sole ProprietorshipĪ sole proprietorship is an individual who decides to go into business for themselves. ![]() There are four primary types (sole proprietorship, general partnership, corporation, and Limited Liability Company), that I’ll explain below. The business structure just refers to how the business is legally organized. The first one is choosing a business structure, which is sometimes called a business entity. In addition to the business license, there are several other things to do before officially starting your business. In addition to the business license, there are a few other requirements of running a craft business, you may want to be aware of. When you first get started, nobody is likely going to notice, but as your business gets larger (and most importantly, profitable), you become a bigger target. By not getting a business license, you are technically breaking the law, and your business could get shut down. Regardless of which type of small business you are running, you are taking on a big responsibility. See some common business licenses by state. For instance, each business purpose is different, and that can matter when considering business licenses, not to mention which state you are operating in as each state has its own separate requirements. Probably not the answer you were hoping for, but there are many variables to consider when looking at whether or not a business license is needed. The short answer to this question is: it depends. It is important that craft vendors do their research on the legal requirements before starting their crafts business. Some local governments will require a local business license, even for home-based businesses. Some states require a business license for every business, while others don’t require one at all. A business license is a legal approval by the government to operate your business in a certain jurisdiction.
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