Friday, April 15, 2011

The Legal Stuff - Starting a Small Arts Biz in the East Bay

Okay, so you have your lil’ etsy shop and you you are thinking about doing a craft show, but you don’t have a business license, a seller’s permit, or insurance. Ahhhh! Get legit, people!

According to the California State Board of Equalization (http://www.boe.ca.gov/info/reg.htm)

You must obtain a seller's permit if you:

  • Are engaged in business in California
  • Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail (this includes wholesalers, manufactures and retailers.)
  • Will make sales for a temporary period, normally lasting no longer than 90 days at one or more locations (for example, fireworks booth, Christmas tree lots, garage sale)

You must obtain a use tax account if you meet all of the following conditions:

  • Receive at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations
  • Are not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code)
  • Are not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code
  • Are not otherwise registered with the BOE to report use tax

But Dude! If you have a seller’s permit from the State of California, you can get your supplies WHOLESALE! Think about what that could do for your profit margin. Sweet!

Register with the State here:

http://www.boe.ca.gov/pdf/boe400spa.pdf

Fill out the form, pay the fee and mail it in!

NOTE: This means that you gotta collect SALES TAX when you sell stuff within the state. You have to collect the right amount for the right county. The tax ISN’T due on April 15, either it is due Jan. 31, and you get fined if you don’t do it on time. Watch your back!

Keep awesome records, and be a pro.

You ALSO need a business license for the City in which you operate.

City of Oakland

Link central is here: http://oaklandbusinesscenter.com/index.php?option=com_content&task=view&id=63&Itemid=59

Follow this link,

http://www.oaklandnet.com/government/fwawebsite/revenue/pdf/Newbizapp.pdf

fill out the form, mail/fax it in with your fee! Bam. More legit.

But Myrrhia, I don’t know what my business classification is!

http://www2.oaklandnet.com/w/OAK024875

But, I STILL don’t know what my classification is!

Pumpkin, you make jewelry (beads, bags, tee-shirts). You are manufacturing.

Say what? Yes, you are a one-human, two-fisted factory.

City of Berkeley

http://www.ci.berkeley.ca.us/ContentDisplay.aspx?id=4236

Follow this link

http://www.ci.berkeley.ca.us/uploadedFiles/Finance/Level_3_-_General/NewBLApplication.pdf

Fill out the form, mail it in with your fee.

Other cities in the East Bay?

Do an online search "City of _______ business license"

Again, it will be a form, a fee, and you can mail it in. They make this easy for you because they want you do to it.

You are all good with the city and state now.

Ficticious business name.

Do you do business under a ficticious business name? "A what?" you say.

Are you Jane Doe Jewelry? No. You are "Fairy Princess Rosamond Jewels"--that is a ficticious business name. If you use this name online, on a banner on your craftshow display, or on a business card, you are using a fictitious business name, and you gotta do some paperwork, Pumpkin!

First, make sure your name isn’t being used by someone else.

Follow this link: http://www.co.alameda.ca.us/auditor/clerk/fbn.htm

Click the link “Online” accept the terms and conditions, and do your search.

Phew! You thought up a unique name. Register it before some other Fairy Princess comes along!


Choose your county:

http://www.co.alameda.ca.us/auditor/clerk/filefbn1.htm

Follow the instructions at that county's website.


If you county is Alameda, use this form, here:

http://www.co.alameda.ca.us/forms/auditor/275-321.pdf

You can do it by mail. Follow the instructions here:

http://www.co.alameda.ca.us/auditor/clerk/filefbn2.htm

After you get your stamped application back from the clerk, you need to put a notice in the local paper regarding your fictitious business name. The papers know what do to. Try to get a cheap one. East Bay Express will do it, but it is kind of expensive. I found a good rate with the Inter-City Express.
Within 30 days after the fictitious business name statement has been filed with the county clerk, the statement must be published in a newspaper of general circulation in the county where the statement was filed. The newspaper selected should be one that circulates in the area where the business is to be conducted. The statement must be published once a week for four successive weeks with five days between each date of publication. An affidavit of publication must be filed with the county clerk within 30 days after the completion of the publication. (Sec. 17917 B&P Code, Sec. 6064 Gov. Code.)

Any person who executes, files, or publishes any fictitious business name statement, knowing that such statement is false, in whole or in part, is guilty of a misdemeanor and upon conviction thereof shall be fined not to exceed one thousand dollars ($1000). (Sec. 17930 B&P Code)
EXPIRATION OF FICTITIOUS BUSINESS NAME STATEMENT (SEC. 17920 B&P CODE)
A. Unless the statement expires earlier under (b) or (c) below, a fictitious business name statement expires five years from the date it was filed in the office
of the county clerk. A RENEWAL STATEMENT MUST BE FILED BEFORE THE EXPIRATION DATE.

You know what all of this means right, you are totally legit. Yay! You have to pay taxes. Awwww . . .

http://oaklandbusinesscenter.com/index.php?option=com_content&task=view&id=37&Itemid=50

Insurance

Please please PLEASE don’t skip this step.

I think of this like a parking meter. Sure, you could get by without putting your coins in. The meter maid NEVER comes around. You are just parking for a sec. No big deal. RIGHT? Yeah--right! I put $2.00 in even if I really only end up needing $0.50 of time, just as INSURANCE against that $75.00 ticket.

Insurance is cheap for you now, because it is based on gross receipts (the total money you take in on your business, before costs). It’s worth it!

If some whacko online customer gives your spikey metal necklace to their three year old as a toy and baby hurts itself, they might sue you. “Ha ha!” you say, “Too bad so sad, they can’t win that case.” No, they probably won’t, but who is going to pay the filing fee to answer the complaint? Who is going to draft the answer to the complaint so you don’t get a default judgment? Hrrrm…you would have to hire an attorney, wouldn’t you? How are you going to pay for that?

A standard insurance policy gives you a coverage type called “duty to defend or indemnify” that means that the insurance company pays for the attorney, pays the filing fee, and gets that whacko to go away FOR you. It’s worth it.

Okay, smarty pants, where do I get this insurance? I can’t tell you who to hire, but I don’t recommend going online. Get a referral to an insurance agent from someone with a small business that you respect.

Make sure that they ask you lots of questions about your operation, your equipment, and your other insurance policies. It is a big red flag if they don’t.

Use someone you like talking to, because at some point, you might need more or other coverage tacked onto your policy, and you want to feel comfortable talking to him or her about what is going on.

For example, a boutique may want to be added as an “additional insured” on your policy. You have to call up your agent and get this document drafted so you can provide it to the boutique.

Other issues with insurance are your tools and equipment. Most crafters live rather close to the bone. Your only source of income may be selling your necklaces. What if the speed freaks in the apartment below you burn your building down trying to make meth? Do you have renters insurance? You do? I could just kiss you! They might give you money for your mattress and your bike.

They might EXCLUDE coverage for your lap top, your soldering gun and all those handmade beads that got burned up, because they are used in your business. Make sure it’s covered! Better safe than sorry!

Feeling overwhelmed? You don't have to do it all yourself. If you have questions, email me at myrrhia@gmail.com, or give me a call (510)421-9005.


4 comments:

  1. Very helpful, thorough, post Myrrhia! When I obtained my seller's permit a couple of years ago I thought that was all I needed....Then the City of Livermore kindly pointed out the need for a city license. Now I need to check into insurance!

    ReplyDelete
  2. This is the first of what will be many posts. If you would like to have other topics covered, please send questions my way.

    ReplyDelete
  3. Great information. Another good resource is NOLO's guide to starting a small business in California (http://www.nolo.com/products/the-small-business-start-up-kit-for-california-OPEN.html). NOLO is Berkeley-based.

    ReplyDelete

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