Are you legal????

[Michelle Pajak-Reynolds]

No, I'm not asking if you're old enough to drink, smoke, or engage in other naughty activities, I'm referring to business licenses.  A Crafthaus member and eMERGE reader submitted a request for information regarding business licenses and if artists need them.  99.9% of the time the answer is YES.  If you are selling goods or services you are in business and therefore need a business license.  If you do not have a business license you may be operating illegally.

Artists are NOT EXEMPT from this.  At the very least, business licenses are typically required at the city/county level.  They are very affordable usually ranging around $50 and can be obtained at your local city hall or county courthouse.  Only certain types of businesses, like hair salons, contractors, doctors, and other business regulated by state law need state licenses.  

In addition to adding legitimacy to your art/craft based business a license offers other perks as well, especially when it comes to purchasing supplies.  Many precious metal suppliers, gemstone dealers, and other companies will only sell to businesses, not individuals, so if you have a license you can purchase materials at wholesale rather than retail.  This means you'll pay less to make your work thereby reducing your expenses and INCREASING your profits.  YAY!

If you need help determining if you need a license, your city's economic development department or income tax division should be able to assist you.  Other great sources for info about business licenses are

http://www.business.gov/register/licenses-and-permits/

http://www.score.org/bp_12.html

http://www.myownbusiness.org/business_permits_license/

Thanks for reading and keep those special topic suggestions coming!  Post topic ideas in the general comment section or send me an email via Crafthaus.

Happy making,

Michelle

[Cheryl Eve]

Hi Michelle,
Thank you for the post and adding some links...It is very helpful!!!

Cheryl :)

[Tod Pardon]

I'm too legal, I'm incorporated. I would only suggest this if you have a large inventory and you want the business to pass on without tax problems to your family upon your demise. Other than that, doesn't a DBA still work? Or was that what you were referring to.

[Michelle Pajak-Reynolds]

A DBA (doing business as) is for businesses that use fictitious names and it requires different paperwork.

A corporation is one of the many structures available for organizing a business and it's very different from having a sole-proprietorship (which is another structure and where one can have some of the "pass on" problems you've mentioned). A DBA also allows a single legal entity to run several businesses without having to establish a new legal entity for each business.

More info about DBA's can be found here
http://entrepreneurs.about.com/od/businessstructure/a/doingbusiness...

More info about business structures and the pro's and con's of each can be found here
http://www.entrepreneur.com/management/legalissues/legalcenter/arti...

What I was referring to is the need for an artist to establish themselves as a legal business entity via a business license if it is the artist's intention to generate income from their work, regardless of the $ amount they hope to earn. A business license is one of the many documents that separates businesses from hobbyists.

[Maureen Brusa Zappellini]

yes, I'm paranoid- and legal too. In Tucson it was a small fee (around $20)for state and a bit less for a City license. I'm always learning- and very thankful for helpful posts and links like these on eMERGE! Grazie :-) MBZ

[2Roses]

We're a C corp. Benefits FAR outweigh the costs.

[Ethical Metalsmiths]

Hi Michelle,

Thanks for your generous original reply to me and for posting the question/suggestion to the larger group. It seems like signing up for a business license is pretty easy, but what about tax filing? I have learned that there are additional laws in the state of Virginia (and perhaps in other states) that need to be in place when purchasing precious metals and reclaiming scrap called a "Jewelers License."

Thank again and good work.

Best,
Christina - Ethical Metalsmiths

[Michelle Pajak-Reynolds]

Hi Christina,

You're very welcome. Your original question helps us all and I'm glad to hear the info I provided, both privately and publicly, is useful and meaningful for you.

For tax filing, your business expenses need to be COMPLETELY, ENTIRELY, AND 100% separate from your personal expenses. I'm working on an eMERGE post related to taxes, record keeping and accounting. It will be ready after the holiday weekend, so please stay tuned....

However, to answer your legal question I think the additional laws you are referring to are connected to the Patriot Act's Requirement for Jewelers to Establish Anti Money Laundering Programs within their businesses.

Information about this is available from the Jeweler's Vigilance Committee. I met several JVC staff members at the MJSA NYC Expo in March. They are delightful and super helpful when it comes to the ethical and legal issues connected to our field. They were also thrilled to have an artist, like myself, approach them with interest in learning more about the ethical and legal issues connected to our passion for sustainable jewelry/metalwork. I'm sure they would be more than happy to help you figure out the legal requirements for your location.

Here's a link for info on the Patriot Act's requirements
http://www.jvclegal.org/index.php?categoryid=49

I'm not familiar with Virginia law, I'm in Ohio, but you may also want to contact Virginia's state courthouse or the state level economic development department

Here's some Virginia related resources that might be helpful
http://www.goveda.org/
http://www.virginia.gov/cmsportal3/business_4096/frequently_asked_q...

I would also recommend connecting with MJSA. They are a jewelry organization for the trades and they might be able to assist you navigate the legal labyrinth.
http://mjsa.org/