Forums: Discussions for entrepreneurs and small business.

Hello Startup!

I have started a small business and created a Sole Prop / DBA. I have already applied and received my EIN and Texas Taxpayer number. When a company I am purchasing from requests my "business license" what exactly are they requesting?

Thanks!

Good question. If it`s a bank or something of that nature, and you`re trying to open a business account, they may actually want to see whatever licenses are necessary in your area. My advice: just ask them exactly what they`re looking for.

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Accounting Made Simple | Sole Proprietor Tax Guide

In California (may or may not be similar) if you are a sole proprietor and purchasing product, most people ask you for your business license for tax reasons. For instance, I had a SP and purchased items from a manufacturer. I got a business license (sellers permit) from the California State Board of Equalization. The manufactured didn`t have to charge me tax.

 

 

Hello!  Being located in Texas and selling product, they are most likely asking for your sales tax permit (also referred to as a license).  They need this "proof" in order to provide your product exempt of sales tax.

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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

Good Day!
I am in Texas, also. Yee-haw.
What if you are providing a service that is non-taxable? I`m sure you still need to have some sort of license. Also, when starting a company, is it best to start as a sole proprietor or an LLC. What are the positive and negatives of each? Thanks.

Well, generally speaking the drawbacks to forming an LLC are slight, if anything. The larger question is whether or not you`re actually benefit from forming an LLC. (If you won`t gain anything, why take the time and money to form one?)

Potential benefit of forming an LLC: a level of liability protection. Whether or not this will actually work depends upon your situation. (Does your business provide a service rather than a product? And if so, are you the only one providing the services? If yes to both, it`s quite possible you could be held liable in the case of a lawsuit stemming from services provided by your business.)

Potential drawbacks to forming an LLC:

1. Cost of formation (this is generally nothing too huge)
2. Possible state taxation complications (I`m sure Gina could inform as to how LLCs are taxed in TX)

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Accounting Made Simple | Sole Proprietor Tax Guide

Beginning in 2007 every Texas LLC is subject to Texas Franchise tax.  Between the annual registration fees, the franchise tax and the professional fees to help you sort through this paperwork, it is often in your best interest to purchase a large liability policy at first.  Once your business grows then you should consider all entity options, because even though LLCs are great, they aren`t great for every business.

There are certain professions that need to be licensed in order to do business.  A list of these are available on the state`s website.  Sometimes you need a license to run a certain business in a certain area (city, town, subdivision, etc.).  However, I have never heard of anyone who you are purchasing product from to ask for one of these licenses.  Since the original poster stated that he was asked to provide this from businesses he purchased from, I think it`s safe to assume they were talking about a sales tax license (or sales tax exemption permit).


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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

PiperTax & Gina,
Thank you for writing.
The business is a K-9 fitness club, so no products would be sold. At first, I would be the only staff. So, would a sole proprietorship be the way to go? I know I would have to get a large insurance policy as well. But, I thought, with one of them, I could separate my personal assets from my business assets. However, doing taxes at the end of the year could be more, eh-hem, taxing with the LLC, no?
Gina: You are a CPA? Do you have lots of tax/new business knowledge? Where in Texas are you?

 

Provide them with your registered DBA certificate (Assumed Name Certificate, doing business as) .

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Thanks and have a blessed day!
Sincerely,
Dennis Thomas, Jr.
President
dennis@AlphaCardServices.net
www.AutomaticResidual.com
www.AlphaCardServices.net
Inc. Magazine # 99 Fastest Growing Private Company in America
817.232.8300
Alpha Card Services
4040 Fossil Creek Blvd. Suite 210 Ft. Worth, TX 76137

With a fitness club you may wish to incorporate sooner rather than later because liability issues are more common than in other industries.

With every business, not matter what entity you choose, you should try to keep your business assets separate from your personal assets.  This makes doing your taxes much easier.  Although you are not required to have a separate bank account when you are a sole proprietor it is extremely wise to do so.

I am a CPA who specializes in taxes.  I`ve been a CPA for almost 16 years. I am currently practicing out of Bullard, Texas, but more than half of my clients are not located in Bullard.  Thanks to the Internet, fax machines and telephones it`s no longer necessary that you use a CPA close to home.

You can learn more about me from viewing my website http://GLGcpa.com and my tax knowledge by reading my blog http://GLGcpa.blogspot.com



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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com