I know the legal paperwork involved with starting a handmade business online might be confusing
but you don't need to register for an expensive LLC.
If you're just starting out in this video,
I'll walk you through the five legal steps to setup your handmade business
as quickly and inexpensively as possible.
Hey, it's Mei here. And I help makers artists
and designers create a consistent income selling their handmade products online.
So many of you guys are looking to turn your
hobby or craft into an income
and have been asking me about the legal requirements of running a handmade business from home
or whether you need to open an LLC.
The good news is that you won't need an expensive LLC
and it's actually totally easy and inexpensive to legally start a business.
Following the steps. I'll be sharing with you today quick disclaimer before we get started though.
As you guys know, I am not a lawyer or a financial advisor.
I'm just sharing what I know has worked
for me and thousands of other sellers following official documentation online.
However, if you're looking for legal advice,
I recommend Consulting with your local government
or a lawyer for the most accurate and personalized information to you.
Also, I'll be showing you how to lie Legally set up your handmade business in the United States.
If you don't live in the US the process may be kind of similar,
but you're going to have to look into it yourself for your specific country.
All right, so the type of business I recommend
for new sellers is a sole proprietorship many of you will have heard of it before
as it's considered.
One of the easiest types of business structures to start in the United States unlike corporations
or llc's or Partnerships.
You don't have to register with the state.
Which means It's very inexpensive and easy to setup when compared to an LLC.
However, the main difference
as a sole proprietor is that you will be personally liable
for any debts lawsuits or taxes your business might face,
but that really shouldn't put you off. Keep in mind.
There are something like 23 million sole proprietorships in the u.s.
Today which makes up about 70 percent of all us businesses.
So it's really nothing new some of the top benefits of being a sole.
Peter is that you have full authority over your own business,
which basically makes Do Your Own Boss. They're also incredibly easy to set
up and compared to an LLC which can cost a thousand dollars just to get registered
sole proprietorships are practically free to start except
for a few other separate fees will get into later on in this video
another cool benefit of running your business
as a sole proprietorship is that you'll pay lower taxes,
especially since you're just getting started with building your income and there.
Lot less complicated to file compared to an LLC
or Corporation because the IRS doesn't even require your balance sheets
when tax time comes around
so you can pretty much do everything yourself which will save you
the additional cost of meeting an accountant
as well.
One of the main disadvantages of a sole proprietorship is that you will be held liable
for any debts or lawsuits with your personal assets,
but the good news is that you can eliminate most of those risks by getting insurance,
which I'll talk Talk about later. Another thing to consider is that
you may have some trouble raising start-up Capital
because many banks require businesses to incorporate before they lend them any money,
but for most of you guys that shouldn't be an issue right now.
I think the pros of starting out as a sole proprietorship far outweigh the cons.
But again, I'm not a lawyer. So if you need more specific information,
I recommend you do your own research online
or consult with an expert that being said once you've decided a sole proprietorship.
Is right for your handmade business here are the five simple steps.
You need to take to get it set up Step 1 register your name,
the good news about a sole proprietorship is that you won't need to spend any money on formerly
incorporating your business which can save you a few thousand dollars,
but you'll probably need to register your business name as a sole proprietor.
You are the business. So the legal name of your business is automatically your own personal name,
but if you decide to use your full name
as as the brand or at least include it in your business name,
then you may not need to register. For example,
you could run your business
as Tiara Browns necklaces without needing to legally register your business name,
but if your business is named Tiaras necklaces,
then you would still need to register because you're not including your full name,
but if like most sellers you want to do business under a different name,
like tiny hands. You'll need to register a fictitious name or what's known.
As a DBA doing business as first you want to check your name is available,
which you can easily do on the United States patent and trademark office website.
Once you've made sure your name is available.
You can file for a DBA with your local or County agency.
The filing fee will vary by state,
but it is usually something very cheap like $20.
Keep in mind though registering a DBA is not the same as registering a trademark.
We're just checking on Online to make sure your name is available
and not being used by other businesses.
Most sellers. Don't find it necessary
when just starting out but if for some reason you did want to protect your intellectual property,
you can always file for a trademark at the patent office
but keep in mind it is not legally necessary and can be pretty pricey for new sellers.
I don't recommend patenting to 99% of sellers step to get your business permits
and licenses once you've registered your EBA you will need to get a business license.
Every locality has its own regulations regarding a business license
or permit for home businesses to find
out what licensing your business is required to have just call your
county or city clerk's office and ask whether you need one.
The process is usually as simple
as filing out a one-page form
and filing fees will usually be anywhere from fifty to a hundred dollars just in case you
will want to ask your local government about any other permits
and licenses.
Licenses needed to run your specific type of business like with a food business.
You'll need special licenses just
for that but chances are you won't need any extra stuff
unless you're working with food or something like that.
Step 3. Get an EIN number next up.
You'll want to get an employer identification number if you operate a loan,
you may not need an employer identification number
and Ein and you can operate and file taxes under your own social security number.
But as soon as you hire an employee or independent contractor or set up a retirement plan,
you must file for an EIN.
They're free and you can get one on the IRS website step for get a separate business bank account.
Now, you're not legally required to have a separate bank account for your business,
but I still recommend it because it will allow you to keep personal
and business money separate from one another plus you will know month to month
whether you're operating at a profit
or a loss by just glancing at Your account having a separate bank
account also helps you file your taxes more easily.
This bank account doesn't have to be a special business specific one.
It can literally be a regular personal checking account with the bank you already use the important
part here is that it's a separate account from your personal money.
Step 5 get insurance because one of the biggest risks to starting a
sole proprietorship is the liability you have
as an owner,
you will want to get private insurance to protect your
personal assets the easiest way to eliminate that
when you're just starting out is to get a general liability.
The one I recommend is act Insurance act Insurance
because it is specifically tailored
for artists Crafters handmade Jewelers sculptors clothing vendors Potter's
art and craft show vendors and You know people like us so for an annual fee,
these guys will cover your supplies equipment products
and any operations revolving around your business allowing you to sell
your products online at a physical store at a show
or at a market and that's it.
That is how easy and inexpensive it is to start a handmade business with all the
legal and financial steps already taken care of from here on out.
You can operate more smoothly and professionally and don't forget to pay your taxes.