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Finance & Legal Tips It's easy and inexpensive to start a jewelry business with all the legal and financial steps completed. You can operate more smoothly and professionally if you follow these steps. If you're already operating a jewelry business but haven't taken care of these legal and financial steps, it's not too late. Set yourself up professionally and enjoy operating your successful home jewelry business now. Five easy steps: 1) Choose and register your jewelry business name 2) Obtaining your business license 3) Re-sale tax number I.D. 4) Set up a separate business account 5) I.R.S. Regulations #1 Business name: One of the most exciting parts of starting your jewelry business is choosing your jewelry business name. It represents your image as a jewelry artist, defining who you are, what you do, and what style of jewelry you create. The name I originally wanted was already taken so I had to put some more thought into it. I like the word "Unique" in my business name because many of my creations were one of a kind. I thought "Designs" sounded professional. Unique Designs was already taken in many ways, shapes and forms. So I personalized it with my name. I did not want to limit myself to one thing and wanted to be able to expand and evolve into other creations and designs. Make sure you will stick with your business name, otherwise it can get expensive changing your website and all your printed materials. #2 Register your Business Name: Check the web to see if someone else has registered your chosen business name in your state. You can find your state's Secretary of State office and locate the business name registration area on your state's website. Most Secretary of State's website have a business name search feature and information on registering your chosen business name in your state. You can also contact your county clerk for the procedure and form needed to register your business name in your local county. Your county clerk's phone number should be in the government section of your phone book. This can be a costly step if you find out later down the road that someone else already has the name you are using. You would have to change all your printed materials, your website, etc. Business License or Permit: Register with your state's Department of Revenue Sales Tax Division. You can find your state's department of revenue online or in the state government section of your phone book. You will need to fill out a form and pay a small fee in exchange for a document with your tax exemption number. You may use your Social Security number if your are the sole proprietor. If you decide to "incorporate" your business later, you will need a "retailer's occupation tax registration number" or "resale tax number". #3 Resale tax number: Once registered with your state's Department of Revenue, you'll be required to fill out and return quarterly state sales tax forms regardless of whether you've made any sales in the previous quarter. Sales tax forms are usually short and easy to fill out, and if you've collected any sales tax during the quarter you're reporting on, you'll need to include a check for the tax collected. This number enables you to buy materials from certain suppliers at wholesale prices with no sales tax. However, depending on the supplier, you may have to buy a minimum dollar amount or a minimum quantity of items to make a purchase. You are required to collect sales tax on all items you sell directly to individual consumers within your own state, and at shows or other in-person venues in other states. But if you make a mail-order or online sale to a customer in another state, no sales tax is owed or collected. You don't need to collect sales tax when you consign or wholesale your jewelry to shops or galleries. The shop or gallery is responsible for collecting and reporting the sales tax since they make the final sale to the individual customer. When you consign or wholesale your work to shops, you'll need to obtain the resale tax number of each shop you consign or wholesale to. That's the proof you need that the sale was to a reseller and not to an individual customer, and therefore that you have no sales tax responsibility for the transaction. If you're ever audited, you'll need this information. My advice is not to consign your jewelry but to wholesale it to the proprietor and it no longer your responsibility and lot less paperwork and headache! Shows, Festivals, Fairs in other States: When you sell your jewelry at a show in another state, you may need a sales tax permit for that state. Each state has its own requirements - some issue a temporary sales tax permit for the duration of the show, while others require the standard permit. Most of these shows you sign up for will provide the information needed, however be sure to find out what you're required to have; tax authorities do occasionally sweep through art/craft shows and shut down any vendors who don't have the proper paperwork. You are also held responsible for charging the correct the sales tax required for the location where you're selling your jewelry (due to varying local taxes, the sales tax can differ from one town to another in the same state). Find out about the paperwork you need and the sales tax percentage to charge by contacting the particular state's department of revenue online; be sure to ask about the sales tax and paperwork requirements for the specific city where the event will be held. Don't be intimidated and let this little procedure keep you from doing out-of-state shows! It's not at all difficult, and once you've done it you'll breeze right through it every time. #4 Separate Bank Account: You don't necessarily need to set up a "business" checking account, just a separate personal-level checking account set up in your name. This will fulfill the IRS requirements for separate business banking, and cost less in fees and other expenses than a business-level checking account. This account is where you'll deposit all income from your jewelry business, and pay all expenses. You can write yourself a check from your business account and deposit it into your personal bank account to pay yourself from your business profits. Just use this separate account in the same way you would if it were a business-level account, keeping your jewelry business income and expenses separate from your personal ones. This way you would know if you were operating at a profit or loss. The IRS requires that you have a clear separation of business and personal income and expenses. #5 The Basics of I.R.S. Regulations: Small business tax and financial issues have two basic steps. (a) Please visit these websites for important laws and procedures. This information is very accessible and easy to understand. (b) A public accountant or CPA who specializes in home businesses can save you immeasurable time, frustration, and money every year. Accountants are not necessarily expensive, and a good accountant stays up-to-date on all the latest tax and financial laws, forms, and quirks. Not only will an accountant be able to assist with all your tax forms and know all the legal ways to reduce your tax burden, but will also be able to answer any financial or tax questions that arise during the year. An accountant's small fee can be worth his/her weight in gold. Later, if you want to set up your jewelry business as a "limited liability corporation", (LLC). Your accountant can give you some guidance when and why you to choose an LLC business structure. Now with all that behind you, it's time to start having some fun!
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