What are the legalities required for opening and operating a small home based business?

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

What are the legalities required for opening and operating a small home based business?

I plan to start a freelance proofreading business at home. I only plan to employ myself, I won’t have any business expenses except my internet bill. For that type of business, what type of business should I register it as – LLC, Sole Proprietor, etc.? I want whatever option is easiest when comes to filing taxes. That brings me to my next question, how to do I start the business? Do I apply for my Fed ID then the company name? Also, what type of a business license would I be required? Is there a way I can pay taxes weekly or monthly as I would out of a paycheck? I’m good at what I do but I haven’t the slightest idea where to begin in starting my home based business.

Asked on January 30, 2017 under Business Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

1) All business structures have pros and cons, but there is a reason many self-employed people (including myself) use an LLC: it protects your personal assets from most (but not all; no protection is absolute or perfect) business-related liability (hence "limited liability company"); by separating business and personal finances, it facilitates taking business expenses as tax deductions; if you opt for "partnership" (not "corporation") tax treatment, it will be a disregarded or pass through entity with no corporate double taxation; it involves less formalities than a corporation; and it looks more "professional" to have an LLC than to work in your own name (though you could be a sole proprietorship and work under a different name; e.g. a DBA or "doing business as").
2) Go to your state's department of state website and form the LLC; then apply for a federal tax ID number at the IRS website. You should be able to do it in an afternoon. You will need to pick a name first, for when you set-up/register the LLC.
3) You don't need a separate business license to be a proofreader; just registering the LLC in your state will be enough.
4) To pay taxes biweekly, like from a paycheck, you'll have to have the LLC pay you a salary and then withhold from it. This is legal, but will involve extra costs, either in time (I have tried running my own payroll and takes a lot longer than you'd think) or money (if you hire a payroll processor, like ADP, to do it for you). Best is to just pay quarterly estimated taxes: you can find forms and easier instructions on the IRS website.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption