Home Articles Work From Home Your Home Business Legalities
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Your Home Business Legalities

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If you are planning to begin a home business it is very important that you understand all the legal issues and tax-related issues that are involved in running a business from home. Many of the legal issues and tax issues are the same for both traditional and home-based businesses, but there are some slight differences that all home business owners should be aware of and fully understand to avoid potential problems or pitfalls. First, you need to register your business name if it is a name different than your full legal name. Some states may require that you publish a notice of your business in your local paper. You should check with your state or county clerk’s office to determine what is required by your particular state since the specific details vary from state to state. You will also need a license for your business depending on the type of business you are starting. Licensing is done on a state or local level. Federal licensing is required for businesses that will be working with specific controlled activities such as making alcohol, firearms and tobacco products. Many cities also require a general business license and some require a separate license for specific business types. Be sure to contact your state and local clerk’s offices to ensure that you have to correct needed licenses. You will be held responsible for filing your income taxes and paying any self-employment taxes that you accrue. If your business is a sole proprietorship you will need to pay income taxes on your net profits. You will use a Form 1040 for this plus a Schedule C or C-EZ for your profit or loss from business. The IRS Publication 334 outlines the expenses that you can take as well as your responsibilities with regards to reporting income and other tax-related issues for your home business. Making estimated quarterly payments for your income taxes will be very beneficial, not to mention that it is required if you expect to owe more than $1,000 in federal taxes come tax time. If you think that you will owe a substantial amount, making quarterly payments can prove to be much more affordable than paying a huge amount when you file your taxes. The IRS Publication 505 gives more information about making and estimating tax payments. Using this guide you can determine if it will be more beneficial to make your estimated tax payments quarterly and what will happen if you overpay your required tax amount. Keep in mind that if your home business produces more than $400 in income during the year you will be required to pay a self-employment tax using the form Schedule SE. This tax accounts for your Social Security and Medicare payments that are normally paid through your employer. State sales taxes may also be required of you if your business is selling goods. If the goods or products that you are selling are being sold wholesale or if you are purchasing materials wholesale, you need to contact an accountant or your state tax office to ensure that you receive a resale certificate. This will help you to avoid paying duplicate taxes on your business. Zoning may or may not be an issue in your area and depending on your business type. Zoning issues can be checked and verified through your city and county offices. Be sure to inquire about any zoning regulations through your housing office as well if you live in a subdivision or have government housing. Violating a zoning restriction can result in your home business being shut down completely. Be sure to check with all your local offices to ensure that you are not breaking any zoning ordinances. Home business legalities can actually make or break your home business. Be sure that you fully understand everything that you are responsible for with regards to legal issues and your income taxes. Ensure that you have all the required licenses prior to beginning your business to save yourself any problems later. Also be sure to save all business-related receipts for tax time. Keeping a good record of all your business practices is an excellent idea in case you get audited over your tax filing. Remember that no two businesses are just alike. Instead of taking advice from someone who has a similar business, it is an excellent idea to consult with an attorney who specializes in business law and be sure to check with a certified accountant to ensure that all your tax issues are being handled professionally.

 

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