We’ve got a new, awesome feature on Handmade Detroit for 2009. Please welcome our resident record notebook girl Beth, who will be posting about crafty business matters.
You started out crafting for fun, then started taking orders from friends and family. Soon you realized your talent could start paying some bills and you started an Etsy account, an Ebay account, or sold at a number of craft shows. Have you now started wondering how to maybe make this a little more…legit?
Many crafters never make this jump, but you may want to as your business becomes bigger and more, well, business-y. Yes, you may need to pay taxes on your income, but there are some advantages to becoming an official business in the eyes of Uncle Sam, too (like not getting investigated by the IRS!).
I’m going to try to help you with advice and basics of the whole process in this new series, as well as give you some tips and tricks on marketing, promoting and managing your crafty business. As a crafty business owner myself, and a graduate of Central Michigan University’s Entrepreneurship program with double minors in Management and Marketing, I hope to be able to impart some of my knowledge on to you (and with help from others when I need it).
If you’ve decided to take the plunge and officially register your business with our government, but don’t know where to start, here are the basics of different types of businesses you can choose from to register as:
- Sole Proprietorship – Registering your business as a sole proprietorship within your state is easy and inexpensive through your county clerk’s office. However, the business is you, and you are the business in the eyes of the law and your government – there is no distinction. In some cases, this is just fine! However, if you are at all concerned about your liability as a business, you may want to consider that in your decision. Simply speaking, if you borrow money as a sole proprietor and default on your loan, the lender can seize your personal assets. Similarly, if for some reason your business were to be sued by someone, your personal assets could be up for grabs as well. If that is not a concern of yours, though, it may be a good fit for you!
- Partnership – A general partnership is just like a sole proprietorship, except you’ve got more than one owner involved. A partnership with someone can be a great thing if you both feel you can work together and learn from each other! As awkward as it may be, if you form a partnership with a friend, you should both sit down and discuss (and write it out) how the money, responsibilities and bills will be divided up and what will happen if the partnership is ever dissolved. You can register your business as a partnership with your local county clerk’s office.
- In Michigan, both a Sole Proprietorship and a General Partnership are considered as a DBA – “Doing Business As”. Registering with your county clerk as a DBA will allow your business name to be recognized (but only in that county) as a sole proprietorship or partnership under your name(s) and, in Oakland County, Michigan, costs about $10. This will give you the ability to open a bank account in the DBA name, accept and write checks with that name, and discourage others that may want to use that name themselves. It is relatively inexpensive, and is a good option for those of you who only do local sales. However, it does not protect your business name from being used by others.
- Limited Liability Company – Registering your business as an LLC is slightly more expensive (in Michigan, $50) than any other option, but protects you personally if someone were to sue your business, or if your business is not able to pay off it’s own debts. In other words, if your business goes under and can’t pay off it’s loans, the bank can’t go after your car! Contrary to popular belief, your income is not “double taxed” like a corporation. Your business and you are separate beings, but you (and your partner if you have one) still own it and control it. However, if you have partners in an LLC, it is slightly more complicated to change ownership if one of the partners leaves the business. In Michigan you can register your business as an LLC with your county clerk or through the mail. You can find the form to register your business (in Michigan) as an LLC here here.
There are many different ways to make your business legal, and please remember that this is just an introduction to your options. You can read more on how to register your business on your state government’s website or by talking with your local county clerk’s office, or through the Small Business Association.
Have a question about anything business-y you’d like me to answer? Email me at firstname.lastname@example.org, and I’ll do my best!
The information provided on is not intended to be legal advice, but merely conveys general information. Please consult a lawyer, advisor or conduct your own research before making your own decision for your business.