I have to spend $150 to make $40

[icxcnika]

Yes, I understand that this is just the way business works, but I find it funny that very few people on the WAHM front make these kinds of things clear.

Okay, I'm a SAHM who enjoys crafting and wants to sell some things each month to make, basically, pocket change. It sounds easy...make things, list them, and people put money in your paypal account. But if I am going to make things and sell them on etsy, I might sell to someone in my state. That means that I legally need a state tax ID number. In order to get my state tax ID number, which is free, I need to know whether I need/want an EIN number, whether or not I am a sole proprietor, and also whether I want to use my legal name as the name of my etsy shop. This is because if I do not use my name as the name of my shop, I will need to file a DBA so I can legally "do business as" the name of my shop. And depending on where I live, I might need to pay a local newspaper to publish the fact that I am "doing business as" [name of shop]. Now, do I want a business bank account or not? And don't forget the business license! That costs money too. Sales taxes on anything at all you sell in your state. Income taxes, but only once you surpass a certain dollar amount in yearly income. And because two kinds of taxes are not enough, there's a self-employment tax too.

So now, because I wanted $40-$80 in pocket change each month, I have to spend about $150, which will take a few months to recoup, granting that people even decide to BUY what I list online. I guess I feel like there are so many SAHMs out there I've heard saying things like "Money is so tight right now, I wish there were some way I could help out from home. Hey! I crochet beautiful scarves! I could sell those online!" Are there lots of people doing this "under the table," or am I the only one who got disheartened when the dream of "selling a couple crocheted scarves for pocket cash" turned into the reality of the expense and bureaucracy of having to legally start my own small business just to sell a couple scarves online each month?

Anyone else want to share their experience, or give me hugs and chocolate to make up for this? LOL.

[rhiandmoi]

In my state, if you make less than I think $600 a year from a "hobby business" then you don't need a tax id. You just file that extra income under your SSN.

But if you do decide to go for the tax id and the business bank account and everything, those are business expenses that can be used to offset your business revenues to decrease the taxes that you would owe. And the self employment taxes can usually be waived if you make under a certain amount and you are listed as a defendant of someone else because they fund your personal Medicare and Social Security insurance.

[SunshineJ]

A lot of it depends where you are I think. A personal checking account that keeps track and is solely for business related expenses and earnings would probably work fine. As for filing a DBA, that is varient by state - I believe in MO it cost me $7 a few years ago. Regarding a business license, which is the part that can get pricey around here, it depends a lot on the local laws. While I would be "encouraged" to get one, I do not have to as I don't have employees or customers coming to my house for things, which is part of our local statutes. Since I'm the only employee (well other than when I drag DH into it!), I can also get by without an EIN. I know not every area is like this however.

K.

[Kristine233]

It depends where you live. I make well over $600 a year and I dont need a State ID/EIN. I file my taxes with my social sec with the rest of our income. The biggest thing that made the difference was whether or not customers came to your house. At least that's what I was told by our local business office, my accountant and the state when I called.

Check with your local office and explain the nature of your business and what your yearly income would be and see what they say.

[icxcnika]

How do I find my local business office? I tried searching and only found the Chamber of Commerce. Could I ask them?

And did you still need a DBA and a business license?

Thank you!!

[Night Owl]

That's the cost of setting up a business. A really, at $150, that's cheap. When I filed for my LLC (after I'd been in business a few years) the cost was $600 for my attorney. But the benefits totally outweigh the cost. Just keep in mind that there are costs up front and that it will take time to recoup those costs.

[icxcnika]

You're right, Night Owl. The more I learn about business the more reasonable $150 seems. I think I was just taken aback at first because no one tells you this at first, it's just "oh yes, make things and collect money!" I was surprised that I needed to set up a business even on such a small scale.

[E.V. Lowi]

Lots of the business expenses are tax deductible, too.

[kokonutmama]

Whoever says, "oh yes, make things and collect money" has never tried to do actually do it. A lot of people experience what you do, I think, based on the number of people with big ideas and little experience who contact my fabric sites for wholesale info. If you make it past the sticker shock you'll find yourself in a much-thinned field

Oh, google "SBA [your county or state name]" for some good resources as to what you need or don't need to do for the size of your business.

[nursingmom]

You do not need all that! All you need is sales tax.

In my county, you don't need to apply for business license unless you make over $10,000 a year.

Also, it only cost $10 to register your business name in my county. That's it.

You do not need to get business checking account. My friend, who handmakes cards, did not get her own business account until 3rd year into her business. Business checking account is free (with 300 transcations/month) with my local bank. But it's not necessary! No! Simply use your personal checking account or paypal account.

Whatever money you earn, you just simply report it as extra income at the end of the tax year. That's it!

All the information I needed to start business was very simply laid out in my county website.

Check out your local county website.

[lilyka]

I don't have any of that. This is the first year I am even keeping track of expenses and income. but I don't really consider Etsy a business. its just me unloading crafty things and I doubt I show much of a profit. I should check into all that but I am pretty ure it is no more complicated than running a daycare. We do not have state taxes though. . . . So if I did make money I would just have to claim it on my income tax is a home business.

[kriket]

My state you also have to make over $500 in a year to have to file income taxes and jump through the business hoops. We have a LARGE Amish population so there are some laws that are a bit lax because of them. (Which is cool for the rest of us too!)

[notjustmamie]

Or you could move somewhere that doesn't collect state income taxes.