Another "Business" question: When to get DBA

[leehljp]

Mike, aka NavyCop posted a thread on the need for a "business license" at this thread:
http://www.penturners.org/forum/f18/license-we-dont-need-no-stinking-license-95028/

I did not want to change the topics with a different question but I do have a question along similar lines:

When, or, at what point should one seek out a DBA?

I sold a few pens when requested, mostly when in Japan, and have a request for a few now. That does not constitute the need, at least I don't think, for a DBA.

I have roughly $5000 in lathe, tools and pen supplies that I have amassed but so far have probably made $2000 over a 5 year period and that was in Japan. I will probably sell $1000 this year once I get started in the next two or three weeks and that will be purely hobby / filling requests, not an endeavor to make sales for the sake of an income.

Your opinions please on WHEN to start with a DBA license.

Thanks!

 

[ed4copies]

AS I UNDERSTAND IT!!!! (could be wrong!!)

If you sell a pen, even a cheap pen, you must claim the income.

If this is a hobby, NONE of your expenses can be claimed.

So, if you want to offset your income with your expenses you have to call it a business. Then, you need to keep records like a business and, in some jurisdictions you have to register your business.

One thing that is a motivator---you cannot just "cash a check" written out to
"joe's pens"--even if you ARE Joe!!! Without a business account named "joe's pens", you will have difficulty having income. And, for a checking account, there has to be a "business". Again, different ways to define that, based on local laws and policies.

 

[Smitty37]

Not so

AS I UNDERSTAND IT!!!! (could be wrong!!)

If you sell a pen, even a cheap pen, you must claim the income.

If this is a hobby, NONE of your expenses can be claimed.

So, if you want to offset your income with your expenses you have to call it a business. Then, you need to keep records like a business and, in some jurisdictions you have to register your business.

One thing that is a motivator---you cannot just "cash a check" written out to
"joe's pens"--even if you ARE Joe!!! Without a business account named "joe's pens", you will have difficulty having income. And, for a checking account, there has to be a "business". Again, different ways to define that, based on local laws and policies.

That isn't quite true Ed. A hobbiest can deduct expenses up to the amount of income derived from the hobby. But, unless you are engaged in business for profit there are a few rules you must follow both in how you declare the income and how you deduct the expenses. For instance you must itemize deductions in order to get it. IRS Publication 535 is the place to see what to do and how to do it.

 

[Smitty37]

Technically

If one wants to get real technical the IRS considers ANY transaction other than an outright gift (and there are limits on those) as a probable source of income. For instance, if Joe and Bob, both hobbiests here at IAP, agree to swap a pen for a bottle stopper, the IRS considers that both have taxible income of the fair market value of the item received. If neither of them uses itemized deductions on their taxes neither can offset that income with related expenses.

The tax code appears to be designed to make criminals out of all of us, how many of us would even think of our PITH pens as being taxable income.

 

[Smitty37]

Need

Mike, aka NavyCop posted a thread on the need for a "business license" at this thread:
http://www.penturners.org/forum/f18/license-we-dont-need-no-stinking-license-95028/

I did not want to change the topics with a different question but I do have a question along similar lines:

When, or, at what point should one seek out a DBA?

I sold a few pens when requested, mostly when in Japan, and have a request for a few now. That does not constitute the need, at least I don't think, for a DBA.

I have roughly $5000 in lathe, tools and pen supplies that I have amassed but so far have probably made $2000 over a 5 year period and that was in Japan. I will probably sell $1000 this year once I get started in the next two or three weeks and that will be purely hobby / filling requests, not an endeavor to make sales for the sake of an income.

Your opinions please on WHEN to start with a DBA license.

Thanks!

General: DBA is in and of itself usually not a license. In many jurisdictions it registers the name of your business and links it to you (it will also prevent anyone else from getting a DBA with the same name). In NY I had a DBA registration and no license was required. Here in DE my Business License serves as a DBA as well.

For Banking: If you have an checks made out with anything other than your legal name and you want to deposit them you will need a DBA. If you have them made out to you personally you won't need one. If you have a DBA you will need an account with the DBA name to do any depositing of checks. You can write business checks on your personal account.

License: You need to check your local laws. Here in DE a business no matter how small is required to have a license and it is issued by the state, BUT there are only three counties in DE. Some cities require business licenses if you do business within their limits.

Income Taxes: Tricky - The IRS is unlikely to come after you for selling a couple of hobby pens to friends and neighbors but the tax code says it is income. Read IRS Publication 535 which discusses hobby income. Having a DBA does not mean you must use Schedule C or file as a business.

 

[Xander]

Mike, aka NavyCop posted a thread on the need for a "business license" at this thread:
http://www.penturners.org/forum/f18/license-we-dont-need-no-stinking-license-95028/

I did not want to change the topics with a different question but I do have a question along similar lines:

When, or, at what point should one seek out a DBA?

I sold a few pens when requested, mostly when in Japan, and have a request for a few now. That does not constitute the need, at least I don't think, for a DBA.

I have roughly $5000 in lathe, tools and pen supplies that I have amassed but so far have probably made $2000 over a 5 year period and that was in Japan. I will probably sell $1000 this year once I get started in the next two or three weeks and that will be purely hobby / filling requests, not an endeavor to make sales for the sake of an income.

Your opinions please on WHEN to start with a DBA license.

Thanks!

General: DBA is in and of itself usually not a license. In many jurisdictions it registers the name of your business and links it to you (it will also prevent anyone else from getting a DBA with the same name). In NY I had a DBA registration and no license was required. Here in DE my Business License serves as a DBA as well.

For Banking: If you have an checks made out with anything other than your legal name and you want to deposit them you will need a DBA. If you have them made out to you personally you won't need one. If you have a DBA you will need an account with the DBA name to do any depositing of checks. You can write business checks on your personal account.

License: You need to check your local laws. Here in DE a business no matter how small is required to have a license and it is issued by the state, BUT there are only three counties in DE. Some cities require business licenses if you do business within their limits.

Income Taxes: Tricky - The IRS is unlikely to come after you for selling a couple of hobby pens to friends and neighbors but the tax code says it is income. Read IRS Publication 535 which discusses hobby income. Having a DBA does not mean you must use Schedule C or file as a business.

Not so.
Are others allowed to use my business name if I have a DBA?

In most states, DBAs, unlike corporations or LLCs, do not guarantee exclusive use of a name. In most cases, the state or county will file any correctly prepared fictitious business name statement, regardless of name conflict.

Also, if your name is "Fred" and you call your business "Fred's Pens" you do not need a DBA ... unless you accept checks made out to Fred's Pens in which case you need a bank account under that name

DBA filings are only required when you are operating a sole proprietorship under a name other than your personal legal name. For example, if your name is John Smith and you are operating or desire to operate a sole proprietorship as "John Smith Plumbing Services," then you would not need to file a DBA to conduct business under that name.

 

[Smitty37]

Could be

Mike, aka NavyCop posted a thread on the need for a "business license" at this thread:
http://www.penturners.org/forum/f18/license-we-dont-need-no-stinking-license-95028/

I did not want to change the topics with a different question but I do have a question along similar lines:

When, or, at what point should one seek out a DBA?

I sold a few pens when requested, mostly when in Japan, and have a request for a few now. That does not constitute the need, at least I don't think, for a DBA.

I have roughly $5000 in lathe, tools and pen supplies that I have amassed but so far have probably made $2000 over a 5 year period and that was in Japan. I will probably sell $1000 this year once I get started in the next two or three weeks and that will be purely hobby / filling requests, not an endeavor to make sales for the sake of an income.

Your opinions please on WHEN to start with a DBA license.

Thanks!

General: DBA is in and of itself usually not a license. In many jurisdictions it registers the name of your business and links it to you (it will also prevent anyone else from getting a DBA with the same name). In NY I had a DBA registration and no license was required. Here in DE my Business License serves as a DBA as well.

For Banking: If you have an checks made out with anything other than your legal name and you want to deposit them you will need a DBA. If you have them made out to you personally you won't need one. If you have a DBA you will need an account with the DBA name to do any depositing of checks. You can write business checks on your personal account.

License: You need to check your local laws. Here in DE a business no matter how small is required to have a license and it is issued by the state, BUT there are only three counties in DE. Some cities require business licenses if you do business within their limits.

Income Taxes: Tricky - The IRS is unlikely to come after you for selling a couple of hobby pens to friends and neighbors but the tax code says it is income. Read IRS Publication 535 which discusses hobby income. Having a DBA does not mean you must use Schedule C or file as a business.

Not so.
Are others allowed to use my business name if I have a DBA?

In most states, DBAs, unlike corporations or LLCs, do not guarantee exclusive use of a name. In most cases, the state or county will file any correctly prepared fictitious business name statement, regardless of name conflict.

Also, if your name is "Fred" and you call your business "Fred's Pens" you do not need a DBA ... unless you accept checks made out to Fred's Pens in which case you need a bank account under that name

DBA filings are only required when you are operating a sole proprietorship under a name other than your personal legal name. For example, if your name is John Smith and you are operating or desire to operate a sole proprietorship as "John Smith Plumbing Services," then you would not need to file a DBA to conduct business under that name.

It does vary from state to state...I do know that in NY State when I registered my DBA one of the things they checked was that no one else was using the same name, but their check might have been limited to the county since the county clerk issued the DBA.

I will also guarantee that you will not be able to register a DBA as Smitty's Pen Works in the State of Delaware but my DBA and business licence are combined here and it might be that the name restriction is because of the license.

I can also say the the Federal Credit Union that I belong to will NOT let you deposit a check made out to John Smith Plumbing Services in an account under the name John Smith and Mary Smith. If the check is made out or endorsed over to a business they will not deposit it into a personal account. I talked to them about that and they told me that it was a federal law...I didn't try to verify it.