Look at the Secretary of State website in your particular state or province. it will tell you everything you need to know, but no two are the same.

@Grazie,
On this side of the pond, a commercial or nonprofit corporate license and sales tax license usually are granted at the same time.

I'm not a lawyer, and I don't play one on TV.

That being said, this really is advice you need from an accountant and/or lawyer for their opinions. I operated several businesses when I was younger, a telephone business systems business, a print/copy shop, and a movie theatre among them. These all were corporations in VT where a business license was required.

Other smaller businesses I have operated were David S. Calef d/b/a such and such. These were individual sole proprietorships that I paid taxes under schedule C on by Federal Tax. I never got business licenses either in VT or now here in NH on these dba's. On professional advice I was told without a storefront, etc. no one from the state will come visit. And the business license automatically triggers state tax filings, etc. None of these d/b/a business would have been required to pay taxes, but would have been required to file a return showing why no tax. As the professional said, or rather communicated with a long continuing shake of his head when asked, I didn't get a business license or ever start filing a tax return. It was a favor to me and the state that the paperwork wasn't generated nor need to be processed with zero tax. Please note this professional never verbally told me not to get a business license. Sort of a CYA action by that individual. Or as my bank president father used to say, "let sleeping dogs lay."

I am retired and on social security now for the last 7 years. Beyond the statute of limitations.

Don't get me started on another state trying to collect sales tax on installations or income taxes wages for employees working in their state that you are not located in. Briefly, one state said they were going to audit my firm and I asked them how. By visiting my business (not located in their state.) Under what authority could you enter my business (not in your state) without my permission. Well, they said if you don't allow us to audit your books, we will seize your installation vehicles when they are in our state. But golly, I don't do any (well hardly any) installations in your state and if I did, my contract with all my customers requires them to pay any taxes due. And on, and on..... never audited, never paid.

This is how it is in CA. Every city and county that you do business in, wants you to purchase their business license. Then at the 1st of the year, they get to tax your vehicle, office & equipment, light fixtures, supplies,....etc. etc. They also want you to list all your equipment or tools by year, if you purchased any new equipment that year, and if and when you have discarded anything. They don't care if you made any money or not, nor if you have to pay taxes to the feds too! Luckily they don't make you pay taxes on the vehicle twice though.
Solution: move out of CA, or be invisible, keep a low profile. Only do work by referral, don't advertise except by word of mouth. You get the idea......

robert

Ok, got it.

G

My experience in consulting with startups is consistent with the previous two posts (well, the previous two that actually provided advice). With the same caveat given by others (I aini't no lawyer), if you haven't formally declared your business (by filing for Subchapter "S" or LLC status) and if you are still working out of your home, I'd definitely "stay out of sight" and not file a license. Once you rent space, once you file papers with the state to declare a formal business structure, and once you have full-time employees and have to hire a payroll service to handle all the withholdings, you will probably get a "friendly" letter from town in which you operate, asking you to get a license. As pointed out, California has become exceedingly unfriendly, with way too many regulations and a blatantly hostile attitude towards business (I will never again run a company here, even for someone else).

So, don't go looking to file a business license: when you need to file it, the local town will let you know, I'm sure.

Wow, that's not how it works in London, at least. We pay Business Rates to our local council. Business licence are another way to raise local taxes?

G

Thank you all very much for your input. Very helpful but somehow my original question went unanwsered.

Does anyone know if a freelance artist can legally stay off the books?


It's probably a dumb question to ask here... but maybe someone knows.

thanks.

Joshua

I have been doing freelance editing occasionally as well as my full time job. Some of my clients turn in my information for taxes. I pay taxes on that income.

If your client needs to file taxes for his expenses, including paying you, then fill out the forms for them and pay taxes. Otherwise, you can probably get by without a business license. I don't have one.

I file the taxes under contract work.

Dave T2

An interesting wrinkle came up when I wanted to open a business checking acount at my local bank here in Virginia. If I wanted to have the account in a name other than my own, I would need to show a business license.

So, if I wanted the checking account in the name of ACME video, I could not do so without the license. I believe this particular annoyance has more to do with anti-terrorism financial rules than with local tax issues.

Does anyone know if a freelance artist can legally stay off the books? This is a somewhat ambiguous statement. Do you mean stay off the books of the company or individual that hires you? Or, stay off the books of the town, county, or state government? Or stay off whatever books you keep?

The company that hires you should fill out a 1099. No taxes will be withheld, but you will get a 1099 slip from them at the end of the year, and you will then have to pay the taxes on your April 15 tax forms. So, make sure you save some money for that. There is really no way around this, unless you do "business under the table." Many small business people do a cash-only business and don't report some of their earnings. This is clearly illegal and if caught will almost certainly result in fines or jail time. So, every organization who has hired me creates the 1099 forms.

If you are trying to "stay under the radar" with the local governments, as long as you work out of your home, you'll be fine. However, be aware that if you hire people to help you, then you must set up to file either a 1099 or W2, depending on how you hire them (W2 for an employee; 1099 for a contract worker). Failure to file these forms can get expensive (legal fees & fines) and if done on a large scale can even result in prosecution. Also, don't plan on running for public office (Google "nannygate").

Home businesses are more common, and a lot less scary, then what people are saying here. :)

My wife works from home on medical transcription. She's hired as an independent contractor most of the time. Unless you file some type of corp paperwork (including a partnership), YOU are the business (self employment income on the federal & possibly state form). That means everything you earn from your "business" is your own personal income. If I pay you $20,000 to do some video for me, you just put that on your taxes (don't forget to keep receipts you write out, etc!). Same as if you do $5 video for me.

Every year I fill out how much I get from my video work. It's not much hat all but I'd rather be honest then try to save a couple bucks in taxes and get audited in several years.

As a general rule, there's things the fed's/state's will and won't let you do from home (IE can't make underwear in your home in NY to sell, apparently), some things require a permit (ie food, maybe animals). You just call the local village/town for questions on that (they get them more then you think), and the county, and the state. When I had a hard time trying to find out who to contact in my county for baked goods I called the county small business dept, that told me. Some states (NY does) have an online site where you can choose what you want to do and they'll give you a list of the required and optional forms.

To sum it up: It has nothing to do with a lawyer or any special paperwork (except self employment income on the tax return) unless you decide to become a company/partnership. As an FYI, when you're an employe both the employer and employe split the fees paid to the govt. When you're self employed you pay all of them. If you're selling things you may need to collect sales tax, but if you're doing video then, odds are, sales tax won't be required because you're providing a service.

To be clear, there is no "freelance" classification recognized by the government.

It's as simple as this, if you are receiving money for providing products and/or services, then you should be paying taxes on this.

In most states, a business license is advisable even for a Sole Proprietor because it allows you to write off business expenses (equipment, fees, services, etc.) that you often cannot as an employee or the like.

Regardless of whether you have a license or not, you should be paying the necessary fees and taxes (e.g. Fed gov requires self-employment tax, etc.). Failure to do so will result in greater fees down the line.

I would take the advice of those saying that you should not file anything in your state until they notice you with a HUGE grain of salt. Late fees on back taxes (state and fed) are killers.

Pay an accountant for an hour of time for them to get you started on managing your business. Determine how much you'll need to pay for taxes so that you can withhold that whenever you receive payment from a client so that when tax time comes, it will be simple to pay the necessary taxes.

"but if you're doing video then, odds are, sales tax won't be required because you're providing a service. "

This is ENTIRELY dependent on the local laws and this statement is generally not true. Check with your states web site.


"In most states, a business license is advisable even for a Sole Proprietor because it allows you to write off business expenses (equipment, fees, services, etc.) that you often cannot as an employee or the like."

Again, not true. a business license from the city or state has NOTHING to do with how you report income and expenses with the IRS. You report your income minus the expenses to the IRS on Schedule C. They could care less whether you have a business license with your state.

As usual in these kind of discussions, many people can't seem to separate the Federal income and Self-Employment taxes from the sales taxes that you collect for the state. They are absolutely, positively, 100% separate. The ONLY connection between them is that the IRS allows you to deduct local licensing fees from your business income .

If you can't tell the difference from income tax, self-employed tax and sales tax - then you really need an accountant or tax attorney.

This is how it is in CA. Every city and county that you do business in, wants you to purchase their business license. Then at the 1st of the year, they get to tax your vehicle, office & equipment, light fixtures, supplies,....etc. etc. They also want you to list all your equipment or tools by year, if you purchased any new equipment that year, and if and when you have discarded anything. They don't care if you made any money or not, nor if you have to pay taxes to the feds too

That's exactly how it works here in Las Cruces, New Mexico too.

Does anyone know if a freelance artist can legally stay off the books?
I would be willing to bet the answer to that is no.
I would call your local city hall (to see if they require a business license)as they would be the lowest level (and would probably be able to direct you to whomever else you need to contact.... but I imagine you would need to at least collect sales tax if you do your work in the same state as your business is in....that may sound weird but most of my business is done in another state 38 miles away (El Paso,TX) which I don't have to charge sales tax.
Good luck....it's kind of a good problem to have though right?

In order for someone to answer , you need to ask an answerable question.

Maybe including what country,state,province,whatever, would be helpful for starters.

geoff

"In most states, a business license is advisable even for a Sole Proprietor because it allows you to write off business expenses (equipment, fees, services, etc.) that you often cannot as an employee or the like."

Again, not true. a business license from the city or state has NOTHING to do with how you report income and expenses with the IRS.

Um, yeah, that's why I said, "in most states". People living in the US have to file taxes with both the state and the IRS, which have different requirements for writing off business expenses. While a business license with a state has nothing to do with your IRS filings, it is often necessary to file the necessary forms for your business income/expenses in that state

You guys have it real tough in the USA. My goodness me.

- g

You guys have it real tough in the USA. My goodness me.

Heh, don't get 'em started.

When I worked as a grip/electrician I don't remember anyone ever mentioning getting a city business license, and I certainly never looked into it. I never had employees and I didn't sell goods for a profit. Nor did I have a yard where I kept grip trucks or other gear.

I think the key issue for a business license is probably whether you have employees and whether you owe local sales tax. The sales tax thing gets questionable but the rule of thumb in my area was that if you paid sales tax when you bought the item and then only passed that cost on to the client then you weren't obliged to pay a second sales tax. However, I'm sure that this really depends on who you're asking and you should definitely get some professional advice to make sure you're paying the taxes you're supposed to pay and avoiding the activities that trigger taxes.

U.S. State and Federal taxes are another matter, and this isn't really all that hard. You report all of your income after deducting all of your expenses. In my case my clients were required to file a 1099 or W2(or W4?) and so there was a record of what I'd been paid. Generally, the 1099 has a threshold at which they're supposed to report but you should just assume that all income was reported. But you didn't really need any sort of license for any of this. State taxes in California usually work out to be almost identical to the Federal Tax. (We're talking income tax here. You can often handle all of your business income this way if you aren't paying other people.)

In addition to the Federal Tax there's also Self Employment tax. This is Social Security and you pay all of it. When you're employed the employer pays half.

The best thing to do is to get professional advice in your area. There are lots of things that come into contention like whether someone you've hired is an employee or contractor, whether you need to withhold taxes for them, whether you need worker's comp insurance, whether you need to pay sales tax, whether you need local licenses, etc. Generally your city will probably always tell you you need a license.

Rob

Wow.

lot's of responses. Thank you all so much. I read each response and consider the ideas presented.

It seems the issue at hand is more the taxes, not the license. In which case I'll be fine and make sure that is taken care of. I guess the main thing is I wan to conduct business legally and illegitimately as possible with out becoming an official business or LLC. I think that won't be a problem as long as Uncle Sam is happy.


thanks much, the information here is very helpful.


take care all

J