When the economy went south, the US workforce contracted by about 6.4% or roughly 8.5 million people, and many of these newly-unemployed followed their entrepreneurial spirit and launched virtual or home-based businesses. Now, it is not at all uncommon to associate with consultants, computer techs, graphic artists, or any number of other service professionals, who run their own home-based internet business.
If you are thinking about an starting a home-based business or joining a Multi-Level Marketing company, read on to learn the basic legal aspects of starting and operating a virtual small business in Florida.
Business Registration, Licenses, & Permits
In order to legally operate your virtual business in Florida, you need to create and register your business entity type: corporation, non-profit, LLC, or partnership. You will need to form your entity with the Florida Department of State Division of Corporations. A word of caution here: the “SUNBIZ” website is deceptively easy to use, and inexperienced users can make serious (and expensive) mistakes with it. Remember that you are making a legal, regulatory filing with the State of Florida which carries real consequences. You should ALWAYS have a discussion with an experienced business legal advisor before you start the registration process. Here at The Law Office of Brandon Woodward, P.A., I can help you review or prepare the right documents to properly form your legal business entity.
If you are operating as a sole proprietor, then you need to register your fictitious business name (a “DBA” filing) if your business name does not contain your actual name. That said, you DO NOT have to register a fictitious business name for a corporation, limited liability company, or limited partnership. I don’t know how this myth got started.
Once you register your business entity, you will need to obtain the proper operating license and permit(s) for your virtual small business. In Florida, it is a legal requirement to have a business license issued by the county where which your business resides. Home-based businesses are not exempt, but most counties offer a simplified application and reduced fees for a business operating out of a residence.
Additionally, you will need to obtain the appropriate business permits from your county or city government to operate legally. The permit you need will depend on the type of internet business you conduct. Pay close attention to zoning regulations, codes, and even HOA rules. You don’t want to invest in your business, to find out later that your type of business is prohibited where you live.
If you are an Independent Contractor, the registration rules apply to you too. An independent contractor is not a business form, but rather a term used to describe a business relationship between two parties. In legal terms, it is, in essence, a sole proprietorship, unless the business is classified as another business entity.
Multi-level marketing company participants absolutely need to read their contract, and know their employee status. If you are considered an independent contractor, you still likely will need to form a business entity and obtain the appropriate licenses and permits. Unfortunately, many MLM sales pitches overlook this requirement when they attract new participants. I can assure you that your county or city does not, and some stiff penalties may follow if you get caught.
Filing & Paying Taxes
As with any other business, you will be required to file and pay taxes for your new business. For income tax purposes, you need to obtain an Employer Identification Number (EIN) with the IRS. This number is assigned to you for tax filing and reporting purposes.
Note, an EIN must be used by corporations, partnerships, and limited liability companies. Most sole proprietors do not need to obtain an EIN, and can use their social security number, but this is not advisable, given the likelihood of identity theft.
Be careful, each business entity type has different tax filing requirements, so you should always consult with your legal or tax advisor for the most accurate information regarding your specific tax situation.
Finally, if your internet business sells goods or products, you will be required to follow the rules for collecting, filing, and paying Florida sales tax. You’ll need to register your business and learn how from the Florida Department of Revenue.
The Law Office of Brandon Woodward P.A. is eternally grateful that you have visited our web site or read our blog. The materials and information contained here are provided for informational purposes only and are not to be considered as legal advice. For questions about cash flow, collections, contracts and their affect on your business, or any other legal issues facing your business, please a message us at email@example.com and we’ll give you a totally FREE consultation.