Guest article provided by: whitneycann.com
Establishing your own gig company is a major achievement that requires years of hard work. A lot of people, like myself, establish their own companies without even realizing it. For example, back in 2010, I started freelance copywriting as a side gig. I was a stay-at-home mom while also remotely completing an AABA program. Fast forward 12 months, and I was working full-time as a freelance writer.
I didn’t realize it at the time, and even though I didn’t have a website, company name, or logo, my writing endeavors took on the shape of a business. I had hundreds of clients and was completing work orders on a daily basis. Come tax time, I had to file a 1099 as a self-employed writer. It was then that I realized I was actually running my own gig company in the form of a copywriting business under my own name.
I hope you have as much luck as I have had in starting my own gig business. I like to believe I established it so easily because of my passion for writing. You can turn any passion into a full-time career. And best of all, it won’t even feel like a job because you’ll be partaking in business activities that resonate with an enhanced sense of well-being.
It’s tempting to think that in today’s world, all you need to launch a successful company is a catchy logo and a social media presence. However, you must complete certain documentation before you can call yourself a company owner, no matter how tiny. Much of the time, your tax papers will confirm whether you own a company or not. If you file as self-employed, your company name is your name.
With content and courage, anyone can start a gig business. Keep reading to learn how content and courage play a role in starting a gig business and for an overview of business licenses, including who needs them, why they’re important, and how to get the process started.
How to Establish a Gig Business
The procedure for establishing a gig business starts with having the courage to open your own company and differs according to the kind of gig you start and your location. The advantages of obtaining the necessary licenses and permissions far outweigh the effort involved in doing so, which is good news for startups.
The Meaning of a Business Permit
To do business legally inside a specific municipality, one must first get a valid business license from that municipality. Registering your business is distinct from getting a business license. A business license allows you to legally operate, but a registration officially adds your company’s information (name, tax ID, contact info, etc.) to official records.
Who Must Obtain a Business Permit?
Anyone who handles money on a regular basis for the purpose of selling products or services must get a business license. However, if you’re a sole proprietor or sole employee, you probably don’t need a business license to do business. Some independent contractors that do need a business license include those working in the beauty, law, health, insurance, economics, and security service sectors. It’s very important to understand that even if you don’t need a license to operate, that doesn’t mean you don’t have to pay taxes. Everyone has to pay taxes on their income.
Failing to register your business puts you at risk of losing valuable access to corporate tax breaks. And since you can’t get business insurance if you don’t register your company, you’ll have to pay for any damages caused by your products out of pocket.
Why You Need a Company Permit
There are many instances in which a valid business license is necessary. Yes, they help the federal government keep tabs on a company’s finances for taxation reasons and provide funds to state and local governments.
In addition, they aid in the identification of enterprises, the accountability of such firms, and the safeguarding of public health and safety. Additionally, the federal government requires businesses in sectors that deal with the general public, such as agriculture and air travel, to obtain specialized licenses and permits.
In truth, many vendors, financiers, and clients are more comfortable working with legitimate enterprises. Therefore, getting a license is a terrific way to expand your gig company’s opportunities, even if you technically don’t need one.
Having a business license also establishes you as a legal company in your own right. Depending on how things are set up, this might shield you from legal responsibility. A distinct organization requires you to file a separate tax return, but it also lets you write off business costs on your personal return that you couldn’t otherwise.
Different Categories of Company Permits
The location of your gig company determines whether you need a municipal, state, or federal license for your business. To legally do business inside a certain nation or municipality, a local business license is normally required.
For remote jobs held by consultants and freelancers, the application process is frequently less competitive. A simple Home Occupation Permit may suffice in certain cases. You can run a business out of your home as long as you adhere to a few basic rules: you can’t have any staff members residing with you, only a certain number of visitors can stop by each day, and there shouldn’t be too much advertising in the windows.
However, those who want to run a business from their house will have to get permission for everything from zoning and land use to construction and fire safety to health and sanitation to advertising and noise control.
There are a wide variety of state licenses available. You must have a valid business license from your state of operation before you can legally do business there. There are a variety of other permits and registrations at the state level that you may need.
To do business legally in the United States, you must have the appropriate federal license. The USDA must provide its stamp of approval before importing animal or plant items, for example. The media industry would submit an application to the FCC.
Applying for a License
You need to be a legitimate company before you can apply for a license or permission. The first step is to reserve a name for your company via the appropriate government agency. Each of the four following methods for registering a gig company name serves a unique function. You may apply for as many or as few of the following that fit your business’s expansion plans best:
- An entity name provides legal protection on a state level.
- A federal trademark protects your brand on a national scale.
- Using a “Doing Business As” (DBA) designation allows you to do business under a name other than your own or the name of your legally recognized company, but does not provide any further legal protection. This is the most typical method of name registration for one-person businesses.
- Having a unique domain name for your company’s website is essential.
A little investment in a business license is worth it to avoid having to compete with another company using the same name. Opening a business bank account or applying for various types of licenses or permits will also require that you get a business license.
Choosing between a sole proprietorship, a partnership, a corporation, and a limited liability company (LLC) as your business structure is the next stage. The paperwork involved, the taxes you’ll pay, and most critically, the extent to which your own assets are in danger, are all dependent on the company structure you choose.
The formation of a sole proprietorship is the least complicated business structure, yet it also provides the most power to the firm owner. (In the absence of formal registration, like my gig-writing company, your company will operate as a sole proprietorship.)
Sole proprietorships are simple to form and have little legal liability, making them a popular option for startups and low-risk firms testing the waters. Since they lack corporate status, the proprietor is solely responsible for all business obligations.
When two or more individuals want to go into business together, the easiest way to do so is to create a partnership. They are an excellent alternative to forming a company for businesses with several owners or groups of professionals.
You have two basic kinds of partnerships to choose from:
- Limited partnerships (LPs) provide for at least one unlimitedly liable partner and many limited liability (and usually restricted control) partners. The partner with unlimited responsibility must file as self-employed and report all income on his or her personal tax return.
- Each partner in a limited liability partnership (LLP) receives protection from personal responsibility for the debts of the firm or any of the other partners.
Corporations are separate and independent legal entities. A company is a legal entity in its own right, and as such, it may earn money, pay taxes, and face legal consequences independently of its owners.
Corporations provide the highest level of safety (which is beneficial for riskier firms), have greater access to capital, and may keep operating even after ownership has changed hands. However, they have the highest formation costs, the greatest complexity, and the highest income tax rates.
There are several types of companies. For example, benefit companies (B corps) are businesses that aim to benefit both their shareholders and the community. S companies (S corps) can’t have more than 100 stockholders, all of whom must be citizens of the United States.
Organizations that do not seek financial gain from their activities operate as nonprofits. Nonprofit organizations don’t have to pay taxes in many countries because of the public good they do. Their preferred moniker, “501(c)(3),” refers to the provision of the Internal Revenue Code that authorizes their tax-exempt status.
Corporations with Limited Liability
The advantages of both partnerships and corporations are available in the form of a limited liability company (LLC). They provide the tax benefits of a partnership with less paperwork and the liability security of a corporation without the hassle. LLCs must abide by the same constraints. When a member leaves or shares get transferred, for instance, an LLC may need to reform in another state.
After setting up your company officially, you’ll need to apply for a tax ID on the IRS website. This number is also known as an EIN, for Employer Identification Number. This number serves the same purpose as a Social Security number and is necessary anytime a business license or permission is sought.
Keeping Your Company Licensed
There are a few things you must keep in mind as the proprietor of a legitimate gig business. Most permits need to go through a renewal process every so often, and doing so requires a valid business license renewal. If you have just hired new staff, introduced new goods or services, or opened a new location, you should update your company’s details accordingly.
Get Ready to Do Some Serious Business
You’ve taken an important step in establishing your gig company legally. Even though there is more red tape and scrutiny for a licensed firm, there are advantages as well. Now that you’ve joined a group of other business owners and established yourself as a legitimate company, you can enjoy a vast array of rights and protections.
To help your gig business expand, it’s crucial to market your company as much as possible. This is where content comes into play. With polished content that showcases your gig business in the best light possible, you can reach a wider audience and sell more products. If you need content for your business website, you need the Whitneycann writing team. Contact Whitneycann today to learn all about using content to grow your gig company.
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