| Starting an online business can seem | | | | license comes from the city. If you are |
| overwhelming at first. Finding the right | | | | outside the city limits, the license comes |
| domain name, getting reliable hosting, web | | | | from the county. |
| design, and figuring out credit card | | | | |
| transactions are full-time concerns. One | | | | Fictitious Business Name |
| often-overlooked component is taxes. If your | | | | |
| website is selling something tangible, you | | | | If your business uses a name other than your |
| are required by law to report it. Leafing | | | | own, then it is required by the Trade Name |
| through the myriad of tax rules and | | | | Registration Act for you to register the |
| regulations is frightening, and some just | | | | fictitious name (which is also known as D/B |
| ignore it altogether (at the risk of being | | | | A, doing business as). It verifies that you |
| audited). However, if you want to save | | | | and your business are one and the same. |
| yourself from future headaches and lawsuits, | | | | Depending on where you live, the form is |
| it's best to get everything straightened out | | | | usually filed at the county clerk's office. |
| as soon as possible. | | | | |
| | | | Trademarks |
| Do I need a tax ID number? | | | | |
| | | | Domain names are a large part of your |
| An Employee Identification Number (sometimes | | | | internet business, and protecting it is |
| called Federal Tax ID number) is a nine-digit | | | | essential. A trademark identifies the source |
| number assigned by the IRS that identifies | | | | of goods or services to the consumers. You |
| your business to the government. You will | | | | cannot register a domain name by itself, |
| need to get one if one or more of these | | | | because just the name is merely an address. |
| apply: | | | | However, your online business name can be |
| | | | trademarked if it provides a service to |
| 1.You pay wages to any employees. | | | | consumers, such as booking flights, research |
| | | | on parenting, comparing insurance companies, |
| 2.Your business is a corporation or | | | | etc. If you create items that you sell on |
| partnership. | | | | your website, those product names can be |
| | | | trademarked. |
| 3.You file pension or excise tax returns. | | | | |
| | | | To learn more about trademark rules, go to |
| If you are the only employee for your | | | | |
| business, then you can run your business as a | | | | Sales Tax |
| Sole Proprietorship entity, and use your | | | | |
| Social Security Number as your EIN. However, | | | | Each state issues a sales and use tax which |
| you should look at all of the business | | | | applies to the use or consumption of tangible |
| structures before you decide which one is | | | | personal property and certain services. If |
| right for your business. | | | | you sell something tangible, tax must be |
| | | | collected. However, if you sell an e-book, it |
| What are my business entity options? | | | | might not have to be. A sales tax number is |
| | | | required for each business before opening, |
| A Sole Proprietorship is the most common for | | | | and the rules are different in every state, |
| an upstart online business. It is owned and | | | | so this is something you need to look into. I |
| maintained by one individual, and has no | | | | live in Missouri, and according to Missouri |
| existence apart from that individual. All the | | | | state law, I am subject to sales tax if the |
| income and expenses are on your personal tax | | | | product's shipping and delivery points are |
| return (form 1040). It is the simplest form | | | | both in Missouri. However, your state might |
| of business. However, you are personally | | | | be different. |
| liable for your company's liabilities. If | | | | |
| someone sues your business or your business | | | | Self-Employment Tax |
| gets too far into debt, your personal assets | | | | |
| can be seized. | | | | Self-employment tax (SE tax) is for |
| | | | individuals who work for themselves, and is a |
| A Partnership involves two or more people who | | | | social security and Medicare tax. You must |
| share the profits, or losses, of the | | | | pay the SE tax and file Schedule SE on Form |
| business. It's just like a Sole | | | | 1040 if your net earnings from |
| Proprietorship, except you need an EIN. Also, | | | | self-employment equaled or exceeded $400. To |
| profits, losses, and liabilities are split | | | | figure your net earnings, multiply your total |
| between the partners. | | | | earnings subject to the SE tax by 92.35%. You |
| | | | will be taxed 15.3% on the net earnings. |
| A Corporation is a separate legal entity from | | | | |
| the individuals who started it. It can be | | | | What can I deduct? |
| taxed and is legally liable for what it does. | | | | |
| The benefit of a corporation is that its | | | | As far as deducting part of your home as a |
| corporate status does not hold the employees | | | | business expense, that only works if that |
| liable. The downside is that it is expensive | | | | part of your home is exclusively for |
| to start, and requires a lot of bookkeeping. | | | | business. If your computer and desk are in |
| | | | the living room, that square footage cannot |
| A combination of a Corporation and a | | | | be deducted. To deduct a part of your home, |
| Partnership is the Limited Liability Company | | | | it mustmeet one of the following criteria: |
| (LLC). The advantage is that the profits and | | | | |
| losses are passed to the owners without | | | | 1.Your principal place of business |
| taxing the business itself, and the owners | | | | |
| are not personally liable. However, there is | | | | 2.You meet or deal with customers or clients |
| no stock, fewer incentives, and loads of | | | | in this area as a normal part of your |
| paperwork. | | | | business. |
| | | | |
| As you can see, there are pros and cons to | | | | 3.An unattached, separate structure used in |
| each business structure. It is highly | | | | connection with your business. |
| recommended that you talk to a local | | | | |
| accountant or lawyer as to which structure | | | | There are also a few other small |
| best fits your needs. | | | | requirements. The only exceptions are for |
| | | | day-care providers and the storage of |
| What other forms and taxes do I need to worry | | | | inventory or product samples used in your |
| about? | | | | business. If you buy a computer and over 50% |
| | | | of its use is for the business, you can |
| Business License | | | | deduct the depreciation on the portion of |
| | | | your computer used for business as a |
| There are many types of licenses, and even | | | | miscellaneous itemized deduction. Expenses |
| for an online business you will probably need | | | | such as web hosting, domain registration, |
| one to operate legally. If the business is | | | | etc, can all be deducted as business |
| located within the city limits, then your | | | | expenses. |