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I have a product I want to manufacture at home and sell online. The online community that would be buyers is rather small. (I am located in the USA) I had planned to open a LLC and register this as a home-based business, but found out that this won't be possible due to restrictions in local zoning laws. For me to collect & pay state sales taxes (state sales tax on any sales to people in the same state) I would need to register a business address, and the restrictions on home occupation (for a home-based business) has a few conditions that this little enterprise of mine would likely not pass. I don't know if the county checks these applications with the state or not. If they did an inspection I'd be sunk--plus I'd be a suspect from then on (if they checked a second time and I got caught again it would probably be a lot more expensive than the first time).... The only way to open this business legally would be for me to rent commercial space that is zoned light industrial, which I don't have the money to do, and wouldn't for at least two or three more years. Note that I haven't mentioned anything about paying taxes; paying tax after a sale isn't an issue. This isn't about tax avoidance at all. The issue is that I can't pay state sales taxes without registering a business in the state, and due to the zoning requirements I can't register this as a home business. A lot of people sell home-made online tho, and I doubt that all of them are following all these rules. Are you one of them? How much of this stuff did you do? I have found some pages about etsy and ebay advice, but nothing real solid and most people admit that they aren't bothering with--things like liability insurance is one of them. Some people do DBA's or an LLC just to get an EIN for tax or resale reasons, but I would not need that for now since the cost of the materials involved is pretty low and my markup is high; I would not need to deduct any taxes I paid for supplies. My taxes from this wouldn't have any deductions, just additional income. The only reason I would have needed an EIN is for issues relating to the LLC itself. So this leaves me considering the total opposite: keeping it as a hobby for the time being,,,, for "business" (financial) reasons. ....If I don't register it as a business at all (including not starting an LLC) then I can't be held responsible for not registering my home as a business location, because it isn't and there is no indication that I tried to show that it was. This means I probably can't have a permanent website or online shopping cart, but I don't think I need either for now. That means I would not have the LLC protection for a while, but there's no way around that. Somehow I don't think they would let me claim LLC protection for a hobby. ....If I don't sell anything to people in my state, then I don't have the problem of collecting sales tax from them,,, which avoids the state sales tax issue entirely. My customer base is online, with a lot (maybe most) of potential customers being in Europe. It may annoy a few people but losing the sales in my own state to avoid this issue entirely for a while doesn't sound so terrible. ....The (federal) IRS rules have some conditions for defining hobbies; "not consistently turning a profit" is one. One non-IRS page says as a guideline that if you made profits at least 3 out of the last 5 years, then the IRS may consider your hobby to be a business. I've been working on this product for about the last six years with no sales or profit at all, so this would mean that I could sell for at least 2 years, maybe 3--which would (should) be enough money (after paying fed & state income taxes) to make the hobby a legit business. This state doesn't seem to have any type of business permit targeted at online businesses; a lot of the stuff they require is only pertinent to a brick-and-mortar storefront. I already asked the state and registering as a retail location is the only way to do it tho. I have found a lot of pages online about "when to make your hobby a business" as well as "when not to make your hobby a business" but they tend to center on psychological reasons, rather than material reasons. Anybody else out there doing this sort of thing? How did you do it? Have you kept it a hobby on purpose? edmund745 fucked around with this message at 02:03 on Dec 24, 2015 |
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Dec 24, 2015 02:01
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What local zoning laws would you be up against? Like you can't set up a storefront or hire 20 people to work in your garage but as long as you're not being a nuisance to your neighborhood you should be alright. https://www.sba.gov/content/home-based-business-zoning-laws Could you register your LLC with a PO Box address? Could you do a sole-proprietorship for a while? If all else fails, could you get an SBA loan for a commercial lease? Just spitballing here, IANAL and all that.
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Dec 24, 2015 08:04
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I'm shocked that the DBA/LLC registration would be in any way bound to the zoning of an operations site. IANAL but I feel like you might be overthinking that side of the equation. To my knowledge the registration address is meant to be a semi-permanent mailing address for the owner, not the physical location of the business. I registered a DBA in AZ (and know many people who rushed right into $200 LLCs) and no one ever asked a question about operations.
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Dec 24, 2015 09:57
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Knightmare posted:What local zoning laws would you be up against? There is no light-industrial classification that is allowed for home businesses, leaving retail as the only possible way,,, but there's requirements preventing claiming that also. quote:Could you register your LLC with a PO Box address? quote:If all else fails, could you get an SBA loan for a commercial lease? BossRighteous posted:I'm shocked that the DBA/LLC registration would be in any way bound to the zoning of an operations site. In my state, all businesses located within must register with the state for tax reasons. And due to the restrictions on what types of businesses you can run out of your home, my application for that registration ould not get approved.
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Dec 24, 2015 14:20
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