Tax Help Relief – Do I Really Need A Business License And Tax ID?
I have gotten quite a few emails recently from ebusiness owners who appear to believe that just because their business is done online or from the comfort of home that the rules and regulations that govern brick and mortar businesses do not apply to them.
The ebusiness questions I get most often don't involve building web sites or conducting ecommerce.
They're more what I call the "Do I really Have To" line of questions, such as:
"Do I really have to get a business license?"
"Do I really have to obtain a tax ID number?"
"Do I really have to pay taxes on income from my web site?"
Yes, yes, and yes.
Do I really have to obtain a business license? This is one requirement that several ebusiness entrepreneurs think they can skirt because they don't have a brick and mortar establishment.
Sorry Charlie. Running an ebusiness out of your office or out of your home doesn't get you off the hook when it comes to licensing.
Based on your area, you might need a city and county license.
Luckily, this kind of licenses are relatively easy to obtain and aren't expensive. For local licensing requirements, talk to your city or county government offices.
Home businesses are also subject to zoning laws that regulate how property can be used and may restrict numerous activities. You should check local zoning requirements and property covenants.
You can find this information at the court house or by calling your local license department.
Legalities aside, the best reason to get a business license is it permits you to set up a business bank account using what's called a DBA.
"DBA" stands for "doing business as."
A DBA is another name that you simply make use of in the operation of your business rather than your personal name. For example your name might be Joe Jones, but you might use "Jones Internet Services" as your business name. Having a business license will enable you to create a business account and get checks printed with your business name, giving you that all important air of professionalism that several ebusinesses lack.
Do I really have to get a tax ID number? Online companies with a physical presence, or nexus, in a state are required to collect and report taxes on sales of taxable goods made to clients living in that same state.
For example, if your online business is based in California, you must collect and report sales tax derived from fellow Californians making purchases on your site.
For this reason, you will be required to have a tax ID number if you are selling taxable items (most services aren't taxed).
Obtaining a tax ID number is generally a simple process of completing a form and paying a nominal fee. You will file quarterly reports and remit any sales tax that is due.
One word of warning: many entrepreneurs have got themselves into serious trouble because they saw fit to spend the sales tax they had collected instead of sending it to Uncle Sam. This can mean death to your business and jail time for you. Often times, this mistake is innocently made when a business owner comingles funds collected as sales tax with their normal business checking account.
Open a separate bank account and deposit sales tax monies into the account and don't touch it till the time arrives to send the money in with the quarterly report.
Do I really have to pay taxes on income from my web site? We've discussed this before and the answer is still the same: Just because your income is produced from an ebusiness does not mean that the income is not taxable.
It is not manna from Heaven. It is income, so report it.
The idea to keep in mind is this: the "e" on the front of "e-business" doesn't stand for "exempt."
In the eyes of the law, your ebusiness is prone to the same laws and regulations that govern the corner mom and pop, thus make certain you execute your business as such.
If you want more information on Tax Help, don't read just rehashed articles online to avoid getting ripped off. Go here: Tax Help Relief
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