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Making Your Business Legal
by
Kristin Thomson and Jenny
Toomey
Simple Machines Records
This paper is an excerpt from Simple Machines' fine
publication, An Introductory Guide
to Putting Out Records, Cassettes and CDs.
More info about the Guide can be
found at the bottom of this paper.
We get a lot of questions about registering as a legal business. We won't
presume to tell you what to do, but we can tell you what we did. When we
began Simple Machines we planned to put out 6 compilation 7" releases. We
considered the label a hobby, and since we weren't planning on becoming a
legitimate business, so we didn't register as one. We did keep track of all
our costs, however and we kept copies of all of our receipts. This way we
could prove how little money we made if the tax collectors came around.
Two years into the project we got the chance to put out the Lungfish record. At
this point we were pretty sure that we wanted to try our luck as a "real
business". It's really pretty easy. Look in the blue pages of the phonebook
for the business license office or treasurer of your city/county. Either
stop by their office or have them mail you a business license application.
There's usually a small fee and some paperwork to do, but it's pretty
straightforward. You'll also need to check on the zoning for your county.
Many places allow mailorder or small businesses to be run out of private
homes, but there are specific rules about setting up a retail business. We're
considered a wholesale/mailorder company, which is fine in Arlington, but it
varies from town to town. In the worst case scenario you can apply for
exemptions.
You will also have to decide what kind of business to create.
There are basically four options for registering your business. In a nutshell
they are 1) sole proprietorship, where one person takes sole financial
responsibility for the profits and losses; 2) a partnership (that's what we
are) which means that we equally share the financial responsibility for
Simple Machines or; 3) a corporation. This takes more legal work and will be
more expensive to set up, but if you are going to be a big business it may be
preferable because it protects you as a person from debt that you may incur
as a business. You can also apply to be registered as a non-profit or a
not-for-profit. These options are complicated and are based on the
assumption that you have goals other than making money.
At the same time you'll need to clue in the US government that you exist by
registering with the Internal Revenue Service and applying for a tax ID
number. Most libraries have copies of the form, and there's IRS offices
everywhere. Of course, once you register you are tax liable, but if you make
under a certain amount per year or if you can show a loss, then you won't owe
anything. Once you begin to make money, you might want to enlist the services
of a professional accountant to do your taxes. It may seem pricy (like $500)
but it is a genuine expense that you can write off, and they can really help
you organize your returns, find all the loopholes and protect you in the case
of an audit.
Notes:This paper is an excerpt from Simple
Machines Records'
publication An
Introductory Mechanics Guide to Putting Out Records, Cassettes
and CDs. Its
widely regarded by the Indie community as one of the most
valuable info sources around, and it receives a big huge thumbs
up from Outer Sound.
You can find more info from the Guide in other Outer Sound
University papers.
However, to get a real learnin',
we recommend that you check out the whole thing. You can do this
in one of two ways:
- Outer Sound has posted a handy text-only version of the
guide which you can
easily print up. Follow the link and hit print!
- Of course, a text-only version is pretty boring. To enjoy the
wonders of Simple Machines' desktop publishing skills, you can
get
the print version by sending a check for $4 (what a bargain!) to:
Simple Machines / P.O. Box 10290 / Arlington, VA 22210-1290
Besides putting out great info for the indie community, Simple
Machines also happens
to put out quite a few great records by bands like Tsunami, Sea
Saw, The Raymond Brake
and Danielle Howle. Take a look at their
Outer Sound Web page for more info!
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