So first off… my site is LIVE!!!! You can check it out at http://webdevtutoring.com. I think this site turned out really well and I am really happy with it.
Ok now that that is done, this last week was heavy! So much was learned this week and there is so much we need to do to make sure we have our businesses all set up. This week was business structures and licencing and taxes.
This assignment was all about choosing the structures that our business would operate under. Some structures we could choose from were corporations, partnerships, LLCs, and sole proprietors.
For my business, since I am the owner of the business and currently the only employee, it makes sense for me to use the sole proprietorship business structure. It says here that:
“A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities” (https://www.sba.gov/content/sole-proprietorship-0).
I realize that later if I decided to add others to be tutors on my site that I would have to change this structure to maybe something like an LLC or partnership but for right now I am the only person running this business and so this structure is best.
It is also “the simplest and least expensive business structure to establish. Costs are minimal, with legal costs limited to obtaining the necessary license or permits” (https://www.sba.gov/content/sole-proprietorship-0). I also will have a lot of flexibility when it comes decisions in the business but “the flipside of complete control is the burden and pressure it can impose. [I] alone [am] ultimately responsible for the successes and failures of [my] business” (https://www.sba.gov/content/sole-proprietorship-0). I don’t see this as too much of a problem though because this business isn’t something that is going to be “bringing in the bacon” for my family. It is a side job to help others, help me keep my skills up, and earn a little money in the process. It also wouldn’t be a bad thing if I do have failures in my business because I am not selling inventory (so there would be no loss to me in that way).
Another perk is the fact that I won’t have to file separate taxes for the business because the business is under my name. This will make things a lot easier come tax season.
So with me being the only person (who is indistinguishable from the business) I believe that the sole proprietorship structure is the right structure for me.
Licensing and Taxes
The next assignment was on the different licenses, permits, and taxes we will need to have in order to run our business. This was a hard subject and I kept feeling like I was doing it wrong.
As I talked about above, for federal taxes, I just file them with my own taxes (which is really nice) though a Schedule C form, etc.
For sales tax, this is the link I used: https://www.sba.gov/content/collecting-sales-tax-over-internet . From this link I found that:
“If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.”
For my business since I am only collecting payments online and all of my sessions are through google hangout and not where they are coming in person to my home, I do not have a presence in a particular state so I am not required to collect sales taxes.
Here is another think to back this claim: https://en.wikipedia.org/wiki/Sales_tax. Here it says that:
“In the United States, online retailers without physical presence in a given state may ship goods to customers there without collecting that state’s sales tax because as of 2011, there is no federal sales tax.”
From the discussion board we talked about what it means to have a physical presence and what it means to have a ‘sales tax nexus’. I looked at this site (http://blog.taxjar.com/sales-tax-nexus-definition/) and this is what it said:
“Sales tax nexus occurs when your business has some kind of connection to a state. All states have a slightly different definition of nexus, but most of the time states consider a “physical presence” creates nexus.
Physical presence can mean a number of things, including:
- Having an office
- Having an employee
- Having a warehouse
- Having an affiliate
- Storing inventory
- Drop shipping from a 3rd party provider
- Temporarily doing physical business in a state for a limited amount of time, such as at a trade show or craft fair”
Looking at state income tax I found this (http://incometax.utah.gov/topics/use-tax):
“You must pay use tax on all taxable items bought for storage, use or consumption in Utah during the tax year if sales tax was not paid to the seller at the time of purchase. You do not have to pay use tax if you paid Utah sales tax at the time of purchase. This includes Internet and catalog purchases.”
I then looked at “use tax” (since I don’t need to collect sales tax) and found this:
Use tax must be paid on the purchase or rental of products (tangible personal property) as well as labor and parts used to repair or renovate products.”
Since I am offering a service and not a tangible product, I don’t need to report use tax on my state income tax report.
Licenses and Permits
This was the link I used to find out about licensing and permits: https://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/obtain-business-licenses-. I then was able to choose which state to check from the links on this page.
According to this link: https://www.sba.gov/content/what-federal-licenses-and-permits-does-your-business-need , I don’t need to worry about federal licenses or permits because my business doesn’t fall under any of the categories in the link.
According to this link: http://dopl.utah.gov/licensing/index.html?n=a, I don’t need to worry about a state license for my business either because it doesn’t fall under any of these categories either.
I also looked through this link: http://dopl.utah.gov/licensing/Fee_Schedule.pdf , and I can’t find anything relating to my business here either.
My business category would either fall under education, consulting, tutoring (which is not the same as a teacher as they don’t rely on me for their education), etc. but I didn’t find any of those categories are in any of the links above.
So my conclusion is that I don’t need to obtain a business license for my business in my particular state.
This was a very big week but I think I came out on top. After looking at all of these links for sales tax, income tax, and license and fees for my particular state and for federal, I have found that I don’t need anything to get my business started except to register my business for a small fee (which is $22 in Utah. Information found here: http://tax.utah.gov/forms/pubs/pub-38.pdf [page 41]). This makes me very happy because it means I don’t have to be tied to a particular state and I don’t need to do anything extra to get this business up and running!
That is all for this week. I hope this was as helpful to all of you as it was for me. Tune in next week to see what have learned about google adwords and keywords!