What types of licenses and permits are needed to operate a craft business?
How to Register a Craft Business
If you have decided to turn your hobby of creating crafts into a business venture, the first thing you need to do is register your craft business. Registering your business will provide legal protection, help you acquire business financing and enable you to operate legally.
Step 1: Choose a Business Structure
The first thing you need to do is determine the type of business structure that best suits your needs. There are many business structures you can choose from, including:
- Sole proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation
The choice of structure will depend on several factors such as the size of your business, the level of control and liability you want, and the tax implications of each structure. Consult with a tax or legal advisor to help you make an informed choice.
Step 2: Choose a Name and Register
The name you choose for your craft business is as important as the products you create. It should be unique, memorable and easy to identify with your craft business. Once you have a name, you will need to register it with the appropriate government agency. Check with your local government to determine the process of registering your business name.
Step 3: Obtain Necessary Licenses and Permits
Depending on the type of craft business you are starting, you may need different licenses and permits. Doing research on what these requirements will be is important to understand before you start. A few of the most common include:
- Business license: This is the initial permission to operate a new or existing business at a specific location.
- Sales tax permit: You need this permit if you will be selling your crafts to customers directly.
- Food permit: If you will be selling edible crafts such as baked goods, you will need a food permit.
Step 4: Obtain an EIN
An EIN or Employer Identification Number is a unique nine-digit number that the IRS assigns to businesses for tax purposes. If your craft business has employees, you will need to obtain an EIN. However, even if you don’t have employees, it’s still a good idea to obtain an EIN as it will help you establish business credit and protect your personal assets.
Step 5: Open a Business Bank Account
It’s essential to separate your personal and business finances by opening a separate business checking account. This will help you manage your finances better and keep track of your business expenses for tax purposes. Find a reputable bank or credit union that can provide your needs and applies and is licensed to aid new business owners.
The Bottom Line
Registering a craft business may seem like a daunting task, but it is an important step in establishing your business legally. By following these steps and doing research and having counsel or advice, you will be on your way to creating the craft business of your dreams.