Do I need a buisness license?

[BlyFreelancing]

My goal this year is to leave my current job and work entirely from home. I'm trying to figure out how I'll need to set everything up before I begin so I know I've got all my ducks in a row. I plan to have two separate income streams. One, I'll be doing freelance virtual assistant / social media management work. Two, I'll be working towards creating revenue through twitch streaming and other modes of content creation. These two will be under separate DBAs.

As I said I want to plan as best as I can for this. In the future, I'd like to make streaming/content creation my main work. If that happens I'd be good to be able to sell merch/hire help. I know that is a far-off thing but If I can prep for it now I would love to do so. I may even dabble in selling on Etsy (altho this is not planned for atm).

So my question is: do I need a business license, along with a DBA? Do I need a license for both DBAs? If I do need to file, what does that mean for me after filing? Will taxes be filed differently? Will there be upkeep involved? I've watched lots of videos on taxes for freelancers and streamers and none of them mentioned having to get a license.  And I don't know how or who to ask about this. This one part confuses me.

[DMarkM1 · Accepted solution]

Your state/local laws will guide you on the need for a business license.  Generally, the answer will be "yes" as they will want to collect taxes from you.  It also sounds like two different businesses.  

As far as tax filing it depends on your business structure.  There are many nuances/options to consider (too many to list here) but generally you can operate as two sole proprietorships and file everything on your personal taxes using Schedule C's. You'll report and pay income taxes and self-employment taxes (employee and employer social security/medi-care taxes) on the net income. This also typically involves quarterly estimated tax payments.   Here is a link with more discussion on self-employment taxes.  

You could also establish your businesses as S-Corporations.  Under this construct you would pay yourself a reasonable salary and be responsible for reporting and submitting the payroll taxes (social security/medi-care) on that.  The other net income would be passed through on a Schedule K-1 to you and then you would generate a schedule E on your personal return to report.  You would not pay self-employment taxes on that schedule E income.

Again this is not all inclusive but items to think about and explore.   

[BlyFreelancing]

Thank you very much for answering! I have two follow-up questions if that's alright. After I have gotten the licenses, will that be the end of registering? Is there follow-up maintenance for that? More paperwork I'll need to keep track of/file? Secondly, should I get the DBAs squared away first or the business licenses?

[GeorgeM777]

It may be the end of your registration process.  As @DMarkM1 explained, much of what you need to do will be governed by the rules and regulations in place where you intend to conduct your business.  Sometimes, business professionals in your position will create a Limited Liability Company, an LLC, as a way to limit their liability.  If you are the only member of your LLC, you would be considered a single member LLC (SMLLC) and as such, and for tax purposes only, you would be treated the same way the IRS treats sole proprietors.  Namely, and as DMarkM1mentioned, you would prepare a Schedule C, Profit or Loss From Business, and include on Schedule C your receipts and expenses associated with your business.  

With regard to follow-up maintenance, you need to be aware of what your particular state requires regarding on-going fees/licenses associated with your business.   We can assist with various tax matters, but beyond the tax issues, the scope of what we provide is very limited.  

A DBA is a way for a business to operate under an assumed name rather than the name of the owner of the business.  You probably can handle whether a DBA is appropriate for you on or about the same time as you decide whether you should register your business as an LLC or some other corporate form.  

In the prior post response, there was some discussion about an S-Corporation.   An S-Corp is a tax election, and a sole proprietor cannot make such election.  However, an LLC can.  Thus, forming an LLC may give you additional tax options not available to someone who operates as a sole proprietor.  

@BlyFreelancing