I'm just a part-time performer, and life keeps getting a bit more complicated. I still get a few calls, and I still have a website. I don't do any aggressive marketing. I'm wondering if it's time to let go of the business license and run this as a hobbyist instead.

What would be some pros and cons? What will change? I know it will impact how I file taxes. Would it change my needs for insurance? Or anything else?

Ed

You don't need a business license for a service business. You don't have a store do you? As in a building. You only need a tax number for when you charge over $500 for a show. This the client has to report this expense.

No store, shop, building, shed, etc. Just half a room filled with stuff!

Got the tax number. Will giving a client a bill/receipt be different on their end if I'm not a licensed business?

Ed

Some home-run businesses require a business license, that's determined by your local municipality. Check with your city hall to make sure. You might just do a DBA.

You don't need a tax number for when you charge over $500. I charge over that amount and have never had a tax number, just a DBA.

You should probably seek the advice of a professional, because we each live in different states, different cities, etc.

Best Wishes!
Kevin

Ed,

If you have a tax ID, then I assume you have an LLC or some other legal entity. From a U.S. Federal perspective, a Single Member LLC includes income and expense on their 1040 for taxes - there is a form, but I don't recall the number. With a Tax ID and LLC you can open a business account and operate a business. There are likely annual fees depending on where your LLC is based. You also need to check on registration with local authorities, State, County, City. Most State websites have all the information you need to figure this out.

Without a Tax ID, an employer may ask for your SSN - if they hire you as a contractor and then plan to issue a 1099 at the end of the year, this may be resonable. Establishing an LLC and having a Tax ID eliminates this need - you are then a company, not a 'person'.

DBA is short for 'Doing Business As'. This comes into play if your LLC (or other legal entity) has a name like 'Hocus Pocus LLC' and you have checks written out to 'Ed Mills Magic' then you would file a DBA with authorities (don't know if this is Federal, State or Local) to operate your business under the 'Ed Mills Magic' name. A DBA only comes into play when your legal entity has one name and you operate under a different name. I don't do this, since my entity is Hudson Magic LLC and that's the name I operate under.

I'm not a legal or tax advisor, so take my comments with a grain of salt and do your own research. But most of this stuff is pretty easy if you go to your State website. It will list right on there what the annual fees are. And the federal tax form is pretty simple - one page as I recall with a total that goes over to your 1040.

Hudson

Ed...

Even if you have an occasional show you get paid for...you should maintain your business status.


Continued Success,
Dr. Dan

In regard to the 1099 as mentioned earlier, there are different rules/laws that apply depending on where you live.
This not only varies by state but also by city or county in which you live.

I found out the hard way in my county at the end of the year a few years ago that if you are issued a 1099 at year end you are considered a business for all intents and purposes and are required to purchase a business license and pay any unpaid business license tax at that time for the previous year.
I found this out when I received a letter from the commissioner of revenue. You might want to make a call to that office if there is such a thing in your area or the treasurer's office of your community to double check, just in case.

It's always better to pay a little at a time than the lump sum at the end of the year !

The 1099 is for federal tax payment, it has nothing to do with local laws. If you read the federal tax laws, you are allowed to fill you magic performances as a hobby. You do not have to file as a business. Of course when you hobby income makes more then your regular job, it may be hard to justify it any longer as a hobby.

The 1099 is for corporations that hire you to show expenses for the company. They are required to report payment of $500 or more. They can of course still provide one for under $500, but the IRS does not require it.

Yes, when a company ask for your Social Security number or Tax ID number, they will be filing a 1099 to the IRS, and you have to show that amount on your yearly tax filings, and pay taxes on that amount.

So when you file your taxes, as a business or as a hobby, that amount must be included.

If you are filing as a business, you can only show a loss for the 1st five years, if you file as a business and show a loss on your federal tax filling, you increase the chances for an IRS tax audit, and most likely have to explain why you are still in business, when you cannot make a living income, and why you cannot make a profit in your business.

It is a waste of time and money to apply to the state for a business license, and become an LLC. The only thing this can help with is if you are sued, as corporation, they cannot sue and take your home and all your possessions for payment of the suit.

If you feel your show can cause harm to individuals, then it would be better to become a corporation. It is protection for your family.

But still, you do not need a retail business license, for a service business.

By all means verify for your city, state, local, and federal laws for your area of the country. Talk only to the person in charge, not a clerk. Seek business accountant, and a business law firm. This will of course cost you for the professional services. Look to pay, in excess of a thousand dollars for these consultants.

You better be making a very large income from your shows, as you will have to also be paying quarterly estimated federal tax payments.

This all means that you have to keep an inventory of your business expanses, and figure your depreciation on that inventory. Mileage, food, travel, motels receipts for business expenses. If you don't do all this, you will be losing money at tax time, big time. As a business, you can pay as much as 50% of your income on taxes.

So if you are working for a lot of companies that ask for your Social Security number or a Tax ID, it is time to make some decisions with you want to work for them, if so you have a lot of work to do.

I beg to differ... in the county I reside in it has everything to do with the local requirement for business license.
I know this for a fact since I received the "year-end surprise" from my local government a couple of years ago. Luckily the commissioner of revenue is a friend of mine and he explained the local laws governing income (1099 vs W-2) and business license requirements as they pertained to my county of residence.... again all municipalities handle this differently so check to make sure.

Business licenses are not issued by the state of federal government but rather the local government.
Although the 1099 is a federal tax document issued to independent contractors (No federal or state income taxes withheld) as opposed to a W-2 form for employees (federal and possibly state income taxes withheld), in some local settings (cities or counties) it is however the determining factor as to whether or not a business license is required for that locality.

If you are issued a 1099 in the county I live in they consider you to be a business and you are required to have a license... no excuses, that is the determining factor, nothing else. They do not care how you file your tax return at the end of the year just how you acquired the income throughout the year.

You can read the federal tax laws all you like but if your municipality requires you to purchase a business license based on whether or not you are issued a 1099 or a W-2 form this information will not be included in the federal tax laws.

Business licenses are issued where I live by the county or the city and the federal 1099 is the determining factor as to whether or not you are required to purchase a local business license. Where I live if you do not purchase a business license and you are issued a 1099 the county I reside in will send you a fine/statement at the end of that calendar year requiring you to pay for not having a business license and require you to purchase one.

Whether you file your federal earnings at the end of the year as a hobby or business has nothing to do with local tax laws and business license requirements in the county I reside in. If you are issued a 1099 you are considered in this county a business and required to have a business license.

Check with your local commissioner of revenue to determine the requirements of your particular county or city of residence as each one differs. Don't take anyone else's word for it other than the person that issues business licenses because they are the person who will generate the bill if you do not have one and are required to have one.

Well, in my country, and magician is a contractor. In my country, a license for a service business or performing a service in not absolutely necessary.

Local government does issue business licenses, if you have a business. Being you cannot have an office in your home for the sole purpose of the business, unless it is placed at the main entrance to the home. Technically, you have no address to give for your business. Local government needs you address for your business, as they consider businesses to be located in a building structure.

They also require a name for your business, your birth name is not the name of your business. It can be, but not automatically.

If you are not making $100,000 (just a good reference figure, not a requirement) a year or more, there is no need for all the legal documents and expense.

Just perform as a hobby your services.

I never heard of all or any of the actors in Hollywood being a business. They are contracted to work as independent actors. They are not businesses, and they perform a service. You really think that all the extras they hire for $75 walkthrough jobs, are licensed as a business for their one day job. The film company come to a town, run an ad, and just hire local people to work for a day or two. Those people are not going to go get a business license. Many actors do not use an agency, and do not work for an agent, the agent works for them.

Show business and retail business is very different, they are not the same.

You really think a 12 year old kid, has to get a business license because he is performing at birthday parties for $25.

First things first... to begin with, "your country" does not issue local business licenses, they are issued by local governments and the requirements for a local business license differ from place to place. The states do issue certain business licenses for professionals such as doctors, lawyers, and other state regulated professionals. So what is required here in "my country" which is the USA in the state of Virginia is going to be totally different from "your country" (county or city) of Indiana.

I would encourage you to read the local laws of every state before you dole out advice for people NOT to get a business license and get someone in trouble for noncompliance.
If you do not live or have not lived in every town, city or county of every state of the United States I cannot see how or why you would feel you are qualified to dispense legal advice to anyone else. Living in Indiana is not going to help anyone in another state in the United States where local governments require a business license based on completely different criteria.

You are obviously confusing a hobbyist (the 12 year old) with someone who has been issued a 1099 by a business entity who has contracted them to perform. The moment a 1099 is issued for a performance payment then you are for all intents and purposes considered a professional instead of an amateur due simply to the fact that you are being paid. You might consider yourself a part-time or amateur professional if you prefer but in the eyes of the law, if you are paid then you are a professional. I'm sure they taught you this at the prestigious “Chavez College of Prestidigitation and Showmanship” or maybe you were out that day that they covered business law in their legal curriculum.

The 1099 is a document issued by the venue or business who hired you essentially telling/alerting you they are going to file it as a business expense on their federal and state taxes and there is going to be a paper-trail which will lead right back to you (the performer) and you should do your due diligence to make sure that your tax responsibility is taken care of as well, otherwise you will be facing penalties and fines for noncompliance for federal, state and any local taxes or lack of proper permits.

The OP is quoted as stating, “I still get a few calls, and I still have a website. I don't do any aggressive marketing. I'm wondering if it's time to let go of the business license and run this as a hobbyist instead?”
This question is going to be something he will need to ask his local commissioner of revenue in his “country” of Yuma, AZ since each and every locality's ordinances and regulations differ when it comes to the requirements of a business license. Something as simple as him still having a website may even be a deciding factor since each municipality has different criteria for deciding who is and who isn't required to have a business license.

If you are issued a 1099 as an independent contractor and reside in Rockbridge County, Virginia in the good old United States of America (that's what we call “my country”... I assume Indiana is in the USA as well) and the Commissioner of Revenue is made aware, through whatever means possible, that you received a 1099 YOU WILL be required to purchase a business license and pay any due tax as well as penalties or fines at year end. It's a local ordinance and many cities and counties in many states do this although some do not... it's another form of tax that they are allowed to collect locally... not state and not federal.

I have been in show business since I was 14 years old as a musician and issued many 1099 forms at year end... sometimes in a single year I've received more than you or most people will have received in their life time. Until a few years ago this local ordinance regarding business licenses and 1099 forms did not exist here in my county, but in the last 4 or 5 years it as been adopted as part of a deciding factor in the local business license requirement. I do not claim to know every state law in VA pertaining to tax collection and permits nor do I care to, but I do know this because I was stunned and stung by it. So don't sit there in Indiana and try to tell me that you know the the local business license criteria here in “my country” of Virginia better than I do.

If you want to have a better understanding and see some different examples of how different states' local governments regulate this, just do a Google search for "1099 form and business license requirements". It will surprise you as to the differences from one to the other.

These links may be of interest to anyone who is interested in the CORRECT information concerning local laws pertaining to business license requirements and YOU should read it before doling out incorrect information based on tax and license requirements you know nothing about because your local laws differ from everyone else's.
http://www.nolo.com/legal-encyclopedia/q......411.html

https://www.sba.gov/content/what-state-l......ess-need