I rent my electrical license to a plumbing, heating and electrical company. Do I file as an employee or small business owner?

[Ashby · Accepted solution]

I assume you received a 1099-MISC for this income. You're going to need to file as self-employed for that income. You could probably write off the expenses you incur to acquire and maintain your license.

[Carl]

Wait a minute. Provided the OP is not actually in business and practicing as electrical contractor while maintaining an active license, I question if this is self-employment income. The OP is not doing anything to actually "earn" the money. I think it's reported on SCH E as royalty income. Why?
Because the OP is not renting out real property. They are leasing out what I guess would be called intellectual property. All work done by the person paying for the use of the license is doing the work under the name of the license owner, and the license owner is legally responsible for the adherence to electrical codes and the such. But they're not actually doing the work.
I've searched the IRS website for this, but find nothing to clarify either position.

[Ashby]

@Carl The royalty angle definitely crossed my mind, but this is actually an illegal practice in many, if not most, situations. If he received a 1099-MISC Box 7 and would like to continue this arrangement, it would probably be best to go Schedule C and move on.