Work at Home

Doing Business When You Can't Stay Put By Cliff Ennico www.creators.com "I'm an Army wife looking to start up a home-based graphics and web design business. I know I need to set things up legally -- and desperately want to, but my problem is our upcoming out of state move. My husband's been given orders to become a recruiter which means he'll be shipped off to Recruiter School soon and upon graduation in the middle of next year we'll be moving to a new location. We won't learn where we're moving until early February. As my husband has at least another eight years in the Army, this kind of thing is bound to happen at least three more times. How do I even begin to set up a business? Do I work as a sole proprietor until we're relocated? Or do I set up something more structured now? " Until your situation changes and you get more settled, you are probably better off operating as a sole proprietor, as you will be able to "move" that from one location to another a lot easier than you can a corporation or limited liability company (LLC). LLCs and corporations are "state specific" - each time you move you will have to shut down the old one and set up a new one, which can be very expensive and time consuming. By operating as a sole proprietorship, you will be able to use the same federal tax ID number whatever state you are in. As you move into a new state, you will register with that state's tax authority and obtain a state tax ID number. If you move from one state to another in the middle of a calendar year, you will have to file two state tax returns for that year only - one in the "old" state for the time you spent there, the other in the "new" state for the time you spent there. Of course, if you're in a business with a high risk of legal liability, you will be sacrificing the protection from personal liability that a corporation or LLC affords. But since you're doing Web design work, it's highly unlikely you will be sued - if a client is unhappy with your work, they will refuse to pay you, or you will give them some of their money back to keep them happy. Still, just to be safe, I would take out a basic "errors and omissions" insurance policy so that if you ever are sued, the aggrieved customer will go after the policy and not your house or other personal assets. "I need a federal tax ID number because I am opening a new business here in the United States. I am originally from Sao Paulo, Brazil and don't have a Social Security Number. The IRS says that I cannot get a federal tax ID number unless I have a Social Security Number (SSN). There's part of me that thinks I don't really need a tax ID number at all - do I need a tax ID number to invoice my clients?" You will need to retain an accountant to help you with these matters. Tax ID numbers can get very tricky and do not want to do this without professional help. You will need to check your immigration status. If the visa allowing you to live legally in the United States does not allow you to operate a business, then there's nothing you can do about that -- you cannot operate an illegal business here. If your visa status allows you to operate a business here, then you should consider getting an ITIN (Individual Taxpayer ID Number) from the IRS -- it's like an SSN for people like yourself who do not qualify for an SSN (for details, go to www.irs.gov and check out IRS Publication 1915). Once you get the ITIN, you can use that to get a federal tax ID number for your business (perhaps -- the rules are very complicated, which is why you need an accountant). As for invoicing your clients, it depends on the type of business. If you are selling goods at retail or wholesale, you normally do not put your tax ID number on the invoices you send to your customers. If you are in a service business, however, and you perform more than $600 worth of services for a customer during a calendar year, that customer is required to send you a Form 1099, with a carbon copy to the IRS. They will send you IRS Form W-9 requesting your federal ID number, and you sure as heck better have one by that time! I always put my federal tax ID number on every invoice I send to law clients. That way if they wish to send me a Form 1099 they don't have to send me Form W-9 - they just look at their latest bill and there's my number. Otherwise I would have to spend an hour a day each January fielding telephone calls and e-mail messages from people asking for my federal tax ID number. Life's too short. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2008 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.