I'm a home-baker in suburban Houston, Tx and can legally sell cakes and cookies out of my home as of September 1. I need to "start" my business but I'm not sure what I want.
I've been doing cakes for friends and family for the past 2 years. If I had been charging, I'd say my gross sales would be in the ballpark of $3500. So this business will most likely not be a busy one. Since I'm also a stay-at-home-mom, I will try to take only 2-3 orders per week.
So my question to you is: Should I get a DBA or should I incorporate?
If you want to do business under a name other than your own name, you will need to file for a dba name (usually with the county). In most municipalities you will also need a business license, and liability insurance is strongly recommended.
Incorporating is probably not necessary, you are a sole proprietorship by default if you don't form a corporation. If you want extra liability protection you can create an LLC, which is separate from incorporation and is taxed as a sole prop by default.
Until it you turn over a hugh profit mark I would just keep doing that way. The reason why I say that is $3500 is not alot of money for just 2 years if you no what I mean to report taxes on, and that can eat a large amount of your money.
You would need to declare income to the IRS (usually on 1040 Schedule C) regardless of whether or not you incorporate, but you would only owe tax on your net income (gross income - expenses). If you have enough business expenses to end up with a negative net income you can usually apply that loss to reduce your taxes owed on other non-business income.
Thanks for your replies.
I do plan to get general liability insurance policy but I was thinking a LLC for additional protection. But I'm unsure about the LLC since my gross sales are so low/insignificant.
Stacie, I was guessing $3500 gross per year, not for 2 years.
The cost to form an LLC in TX is only $308, so if you have significant assets (cash, home equity, stocks, etc) then it's probably worth it.
Oh ok sorry.
I'm in Conroe and got a DBA. I'm also a stay-at-home mom and I do 3-4 cakes/week. If you don't plan to have a business name and just want to sell cakes as a hobby rather than a business, you don't need anything, but liability insurance is a good idea. I got mine from Farmer's Insurance for $50/month. And yes, self-employment taxes will have to be reported on income (gross - expenses). It's been pretty easy, so far....and fun!