Requirements to register a business? (US law)

What are the conditions under which you are required to register what you're doing as a business? Like, I know it isn't the fact you're making money cause babysitters and the like don't need to register what they are doing as a business. I also heard that you don't need to register as a business as long as you don't have employees? From searching the forum, I read that you still need to declare your income - which I had assumed in the first place. But when you register as a business, you have to pay the employer and employee taxes I think? Then there are the property taxes some dude mentioned, which is scary. So I would rather avoid registering as a business. What say you?

I live in ohio if that makes any difference.

Usually you file a Fictitious Business Name and make this publicly known by putting an ad in the "business notices" section of a circulated publication (newspaper). If you are self employed then from there check the IRS on tax requirements. If you own your home, your property taxes may be partially deducted as a business expense. Get an accountant and an attorney to explain all that.

For an FBN it's pretty simple. Fill out a form in a local government office after checking their file for an existing claim to the name. Filing an FBN does not obligate you to establish a business using it, but it will expire and you'll lose the right to it after a few years if you file and don't use it.

You need to register as a business when you start acting like one. If you seek out new customers or begin to market yourself as having these skills, you're acting like a business and should then register as a business. If people find out through others or through general conversation that you develop web sites, and they pay you to develop one for them, all you have to do is claim the income (officially). You can claim this income as extra income, or you can claim it as hobby income and write off hobby expenses up to the amount claimed as hobby income. However, you can only classify what you're doing as a hobby for so long, and officially, a hobby is something in which you don't intend to make money.

IRS Small Business Info

I'm not a lawyer or accountant, but I have a few savvy-business friends who can talk the talk. Really, what I think you're mentioning about taxation depends on how you set the business entity up. (DISCLAIMER: I said I'm NOT a LAWYER or ACCOUNTANT. Don't believe anything I say here. Consult a real lawyer or accountant for details.)

For instance, if you set up a Corporation (or its foreign equivalents (Co., Corp, GmBH etc.) for non-US readers), it is treated as a living person for legal purposes in all US states (and just about anywhere internationally). This means, if any lawsuits happen, the corporation is sued, not the person/persons that own the corporation. So, a court order cannot seize your personal property, only property that belongs to the corporation. Of course, this means you have to designate Corporate vs. Personal property pretty clearly and keep good accounts. Another problem with Corporations is the problem of double taxation (this applies in the US, but I believe most other countries rules are similar). Since the Corporation is legally treated as a living breathing human, any income made by the corporation is taxed accordingly. Now, obviously, if you're the owner of the corporation, you will distribute the remaining profits that the Corporation made to yourself (e.g.) as a salary. However, this remaining money that the corporation paid to you is considered YOUR income, so you are taxed on it as well. However, if you choose to keep all the money within the corporation (in order to avoid being double taxed), then any thing you buy with that money is considered property of the Corporation, not your property. So, in case of lawsuits against the corporation, those properties can be seized because they are corporate property, not yours, even if you're the only person using them. Like I said, you need to keep good accounts of what legally is yours vs. corporation property and make sure that any payments that the Corporation makes to you are properly accounted for. Different states have different rules for how to set up a corporation, so the procedure and paperwork may vary per state. Many people in the US either set up corporations in Delaware because they don't charge taxes for business that is done outside the state and has laws that are corporation friendly. The other popular state to set up in is Nevada, because they allow setting up a corporation without a record of who really owns it and has better protection for company assets. One of my friends set up his corporation in Nevada by driving up to Las Vegas over a weekend.

Then, there are LLCs and LLPs (Limited Liability Corporations and Limited Liability Partnerships). These are usually easier to establish than Corporations in most states and most of my friends operate under these. For one thing, they avoid the double-taxation problem. Assume that your LLC has 3 people registered as the owners and it made X dollars in taxable income last year. The LLC itself is not taxed for anything, but the 3 owners of the LLC are each taxed as individuals assuming that they made X/3 dollars each (or in some similar ratio). Under some circumstances, you can also claim deductions for losses that the LLC made, under your personal tax return.

Fictitious Business Names (FBN) are usually easy to set up for individuals to operate under. You need to file the name with the County Clerk and publish that SilentRage is now going to operate under the FBN of Yoyodyne Systems in a local newspaper and that's about it.

In Australia we have what's called a Frank Divident on Company profits.

Eg: Once the company pays its flat tax 30% on its "Profits", then whatever is left can be given to the shareholders tax-free. A Frank divident means no-one in Australia will ever get double taxed.

The other downsides of companies are the cost of running, & the Directory isn't void of all responsibility - If it can be proven that any illegal activity the company has been involved in was known at the time by the Director (you), then you become liable then.

I've owned several restaurants for 18 years and I can't remember the answer to half your questions. Especially since my wife took it over.

If you have employees you must pay Social security and Medicare which, I think, is equal to what is withheld from an employees paycheck. For example, if your paycheck is $100 and $20 is the employees share of withholding, the business is responsible for about $20, also.

Property taxes are only paid on property the business owns but this depreciates every year.

If you are just running a little business on your own you should just declare your income and not worry about registering. Call up some accountant and talk. They might give you a meeting for free if you might become a potential client.

As far as protection of personal property by registering or incorporating, don't make me laugh. There is no protection no matter what anyone says.

A little more information. The Tax ID is for when you collect sales tax and pay it to the state. So you wouldn't need one for a service business.

Alright, good information all. So you definately need to register as a business if you have employees, but are there other specific conditions under which you have to register as a business or get a Fictitious Business Name?

Depending on your state, you may not be able to use the judicial system without properly registering a name.

In Pennsylvania, a business cannot dispute anything in a court unless they are properly registered.

If John Smith owns a web design shack, he can use the name John Smith's Web Design without registering it as a fictious name. But he cannot use things like L33T Web Designs or even John Smith & Associates Web Design.

Technically, he can use whatever name he wants, but if he uses L33T Design or something, and his customer signs a contract and doesn't pay, he can't take that customer to court unless his name is properly registered.

Check with your state's Department of Revenue for specifics.

Just talked to my accountant. He said that if you represent yourself as yourself then there is no need to register with the state for anything. However, if you get checks made out to you under a company name, then you need to register as a fictitous name which is about $7 in Missouri.

He highly recommends, for protection, becoming an LLC. This way no one knows how big you are and there is Limited Liability. This cost, in my state, is $105. This also covers you should you get employees later or incorporate. You can still be an LLC.