Forum Moderators: buckworks
Situation:
I have an uncle who is closing down a small toy store in Japan. Since my uncle travels from Japan to the U.S. quite frequently, I'm asking him to take those toys so I can sell it online.
I thought of using eBay auction first; but, for experience purposes, I wanted to start a small website and sell it there instead. Since I do not really have any capital, I thought of using PayPal as my online billing service for now.
Status:
I'm an U.S. citizen, just turned 21 years old, who lives in Los Angeles, California. I'm currently an intern at a small web company (making $15.00/hr).
Question:
(1) Do I need a business license (i.e. Inc, LLC, S-Corp, Partnership, etc) to sell items using the PayPal Premium/Business accounts?
(2) Somewhat related to above but how should I manage my taxes next year?
(3) Due to my inexperience in this field, are there any hidden issues I should be worried about?
Thank you, in advance, for reading and answering my questions. Much appreciated!
-nhaga.
Need it? No not really, why get deep into something when yer running it from home. If it turns out to work out well and your gonna count this income on your taxes you have a good write off by having a corporation and those other ones :D
Talk to your parents and a CPA see what they think ;) Depends on which side of the line you want to walk ...
If I don't *really* need a business license to try this toy store method out, how would I handle my taxes? Is there another form I need to fill out?
I guess, I can first try it out and see if there's any potentials. Then, act accordingly afterwards (i.e. use the profit to pay all the expenses for filing a business license and credit card processing service).
As you mentioned, I will speak with my parents about it and see what they think.
Again, thank you very much.
2) If you file as sole proprietor, your business income and expenses can is part of your 1040 Schedule C
I know many accountants use QuickBooks or PeachTree so entering summary income and expense data should be sufficient. But an accountant to be sure.
Since you live in Los Angeles, CA (I do as well), your first two years for a business license tax is free if file you on time. I filed three years ago after I started my business. Unfortunately, the first two years were not exempt since I filed so late. I had to pay the all the fees plus late interest for those years. There was also a heavy penalty, but I asked them to waive it (phew!)
Aside from the business license tax (~$120 annual), you'll also need to file for a:
1) fictious business name if it does not contain your name ($10 to file, ~$40 for newspaper announcement),
2) reseller's permit (free), and
3) EIN (Employee Identification Number) with the IRS (free). This will "legitimize" any business purchases you make after you've filed with the IRS
In my opinion, its pays to be organized and write business plan before you start your business. Also browse the Small Business Administration website and score.org (free advice from retired professionals) for other tips.
I will visit those websites you've suggested above; yet, if you have time explaining me a bit more about the "first two years for a business license tax is free [in California]", I would appreciate your time and help.
Again, thank you very much for your advices.
-nhaga.
"NEW BUSINESS EXEMPTION EXTENDED TO INCLUDE SECOND YEAR OF OPERATION:
Beginning in 2002, the business tax exemption for qualifying new businesses (under Section 21.30 of the Los Angeles Municipal Code) is extended to cover the first two years of operation. A qualifying new business will not be required to pay the applicable minimum tax or any additional business tax for the first two years of operation if its taxable gross receipts are less than $500,000 and their annual tax renewal form is filed timely. Previously only the first year of operation was covered. Also in December 2002, operative February 1, 2003, the two-year start-up business exemption was extended to out-of-city businesses that establish a new
location in the City."
The business tax application is at [lacity.org...]
("link Tax Registration Application")
Details regarding Filing for Fictious Business Name [regrec.co.la.ca.us]
My apologies to the rest of the web community for providing Los Angeles, CA specific information which may not apply to the rest of you.
I’m reading all those articles/URLs/information you’ve provided here and will act appropriately. Again, thank you very much for your help.
-nhaga.
If your open a business account perhaps using the name of your web site. PayPal will only allow you to withdraw funds to a bank account of that name. If you do not have a business registration, you will not be able to open a business bank account. Therefore I would suggest that you use a premier bank account for the time being.
There are a couple of low cost payment processors you can think of. 2checkout.com and paysystems.com
Both will only ask for a US$50 set up fee with no monthly charges. The transaction charges are quite reasonable. The good thing is that unlike paypal, your customers can pay straightaway without signing up. The downside is that both have had a lot of complainets about poor and inconsistent service. I have had some very bad experiences with 2CO so perhaps you should look at paysystems.
I will use the PayPal's Premier account for now. Then depending on how toy business goes, I will act appropriately (i.e. upgrade from a Premier to a Business account and obtain necessary business licenses).
However, I read PayPal's FAQ recently but was not able to determine if changing your Premier account to a Business account is allowed.
Also thanks for your information on using PaySystems; I will definitely look into their service as well.
Again, thank you.
-nhaga.
Also, I just found out that the Business account allows your employees to have accounts/logins with certain permissions assigned to them.
Of course, since I don't have any employees, this feature would be irrelavent for me...
Again, I highly appreciate your time, sun818. Thank you.
-nhaga.
