When you start a new business there are certain legal matters that need to be taken care of.  I’m not a lawyer or a tax expert, I’m just speaking from experience of being a business owner in Missouri.  I encourage you to seek out the details of the laws in your own state.

Ficticious Name Registry:  This is taken care of with your home state if your business name does not contain your legal name.  It does not reserve your business name exclusively for you, but just lets the state know who is behind the name.

Sales Tax ID:  You need to register for this if you are selling tangible goods.  You will be required to file quarterly sales taxes the first year and if your in state sales are sufficiently low then you can switch to annual paying sales tax.  Having this registration lets the state know if you don’t pay your tax so they can come and find you.  It also is what you need to buy merchandise at wholesale prices for resale and to avoid paying sales tax yourself on any items you plan to resell.

Business License:  Check with your city government here.  Usually this is only required if you will have a brick and morter building or be inviting large amounts of business to your home.  I didn’t need one for my limited amount of custom sewing that didn’t bring much traffic to my neighborhood.

Permit:  This may be necessary if you plan to advertise with flyers door to door or on car windshields.

Copyright:  You may file for a copyright for any original work (music, writing, sewing patterns, art, recipes) that you plan to sell.  There are also “poor man’s” copyright options that may or may not hold up in a court of law.  If you feel like copyright applies to you, be sure to do due diligence with your research about it.  This is a good place to start:  http://www.copyright.gov/

Patent:  This protects any invention or tangible good that is uniquely yours.  Find out more here:  http://www.uspto.gov/

Trademark:  This protects your logo and or your business name/slogan so no other company can use it.  http://www.uspto.gov/

Other legal business formations:  such as partnerships, c-corps, s-corps, etc.   You’ll need to find other help to sort all this out, but the easiest way to start a business is as a sole proprieter and just file your business related income on your regular tax return with your household.  You may want to look at other types of business formation when your business assets or liabilities become so large that you need to separate from your household to protect your personal assets. 

If you have a home business there are lots of income tax deductions available to you, but you will also be responsible for paying self employment tax (basically social security) on your wages.  If you work for someone else they typically pay that for you.  Also, if you make a certain amount of money on your business, you will need to file quarterly estimates for your taxes.  Failing to do this will bring penalty fees and other unpleasantries (like a huge tax bill at the end of the year.)  Be sure to seek out advice on this before disregarding it.

A simple way to be ready for tax time:  Get 12 manilla envelopes and label one for each month of the year.  Keep your sales slips, business expense receipts (including phone bills/internet if it applies and postage) and mileage records in this envelope.  On the last day of the month write the totals on the outside of the envelope for:  Gross income, expenses, and business related mileage. Group each set of records together with a paper clip and put them back in the envelope.   Then start fresh in the next envelope for the next month. 

You may also have home office deductions or deductions for equipment that you can claim at the end of the year.  If you purchased inventory to sell, that purchase price is not deductible until you sell the item.  That is why most businesses conduct an inventory at the end of the year to double check the amount of inventory that they can deduct.