Hobby or Business? That is the Question…

July 24, 2007 by mrbizplan.

eWalcot asks

I am considering a micro-business making and selling a product from home.  I know there is a fine distinction between a hobby & business, but do I need a business license or tax registration certificate before I consider this endeavor?  Do I also need a seller’s permit? 

Mr. BizPlan Answers

I will try to answer the question as best I can…let me break it up into parts:
 
1.  I know there is a fine distinction between a hobby & business, but do I need a business license or tax registration certificate before I consider this endeavor? 
 
No…you do not need a business license or tax registration to do what you are doing.  So long as you are doing business under your own name (not a “trade” name or “doing business as” name DBA) then you can use your social security number for business purposes and file your taxes using a Schedule C or Schedule C-EZ at the end of the year under your social security number. 

If you are using a name other than your own you can file a trade name registration with your state’s secretary of state office.  Either way you can use your social security number to file taxes.  Most people do not like having their social security number floating around these days so applying for a EIN (tax id) number is recommended, even for sole proprietors.  

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