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So You Have A Good Home
Business Idea. What's Next?
By: Arina Nikitina
So, you want to start your home-based
business.
You have an idea.
But do you know where to start???? That's
important to start with the legal aspects of
running a home-based business: business
registration and taxes.
The first thing you should consider is
choosing an appropriate form of business.
From a legal point of view, there are
four types of businesses:
- Sole proprietorships (This is the
simplest form of business. A sole
proprietor directly owns the business
and is directly responsible for its
debts.)
- Partnerships (A form of business
entity in which 2 or more co-owners
engage in business for profit. For the
most part, the partners own the business
assets together and are personally
liable for business debts.)
- Corporations (A corporation is a legal
entity that is separate from its owners,
the shareholders. No shareholder of a
corporation is personally liable for the
debts, obligations or acts of the
corporation.)
- Co-operatives. (A co-operative is a
corporation organized and controlled by
its members, who pool resources to
provide themselves and their patrons
with goods, services, or other
benefits.)
I think in most home business cases the
most suitable is sole proprietorship.
A sole proprietorship is a business
entity owned and managed by one person. The
sole proprietorship can be organized very
informally, is not subject to much federal
or state regulation, and is relatively
simple to manage and control.
REGISTERING YOUR SOLE PROPRIETORSHIP
Unlike an LLC or a corporation, you
generally don't have to file any special
forms or pay any fees to start working as a
sole proprietor. All you have to do is
declare your business to be a sole
proprietorship when you complete the general
registration requirements that apply to all
new businesses.
Most cities and many counties require
businesses - even tiny home-based sole
proprietorships - to register with them and
pay at least a minimum tax. In return, your
business will receive a business license or
tax registration certificate. You may also
have to obtain an employer identification
number from the IRS (if you pay wages to one
or more employees), a seller's permit from
your state (If your business involves
selling taxable goods or providing a taxable
service such as renting goods or fabrication
labor) and a zoning permit from your local
planning board (for construction business).
And if you do business under a name
different from your own, such as Custom
Coding, you usually must register that name
-- known as a fictitious business name --
with your county. In practice, lots of
businesses are small enough to get away with
ignoring these requirements. But if you are
caught, you may be subject to back taxes and
other penalties.
TAXES
In the eyes of the law, a sole
proprietorship is not legally separate from
the person who owns it. The fact that a sole
proprietorship and its owner are one and the
same means that a sole proprietor simply
reports all business income or losses on his
individual income tax return ? IRS Form 1040
with Schedule C attached.
More information about IRS Form 1040 and
Schedule C you can find at http://www.irs.gov
.
As a sole proprietor, you'll have to take
responsibility for withholding and paying
all income taxes, which an employer would
normally do for you. This means paying a
"self-employment" tax, which
consists of contributions to Social Security
and Medicare, and making payments of
estimated taxes throughout the year.
About The Author
Arina Nikitina operates Home Business
Resources (http://homebizinfo.8m.com/).
There you can find everything you need to
know about Internet marketing, website
promotion, affiliate programs and more.
Hundred of FREE e-books, two hundred of
articles, free guides and tutorials,
business consulting and more.
http://homebizinfo.8m.com
arina@homebizinfo.8m.com
Article Source: http://EzineArticles.com/
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