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Originally Posted by Telecommuter
Have to agree with Jenn. We consult many clients who are just starting up. For Mom and Pops who are just starting up, we rarely encourage them to start right off with a business license. A business plan, yes, but licensing, no.
There are literally thousands of people who "start a business" everyday. The great majority of them will not go anywhere, maybe make a few hundred bucks. Then, either they get discouraged or they let life get in the way.
Starting right off with licensing doesn't give the person a chance to find out if the business or self-employment is even for them. It causes them to put all their focus in the wrong place.
The fact is, it isn't a real business until you come up with a plan and continue to work it. Otherwise, it's just an experiment. Focusing on the licensing up front doesn't give them a chance to explore before settling in.
It's too easy to take some days to go get a business license and file your business name with the State, then sit behind your computer and say, "I'm in business." It simply isn't so. Until you turn more than a dime or two, it's a hobby, not a business.
In fact, unless you turn a certain amount of profit over a specified time (I believe a few years), the IRS actually considers you a "hobby," and not a "business." And, even if you have all the licensing in place, they will not allow you to take advantage of tax benefits nor write-offs.
However, once you are putting decent amounts of time into your business on a regular basis and are bringing in more than pennies, and you are working your plan, then consider yourself "in business."
Then, and only then, go get a license, make your business name official with the State, set up a new business checking account and make it official and legal. You are no longer just testing the waters. You are no longer just a hobby. You're committed to doing all you can to make it work.
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Thank you very much for your appreciated comments.