Micro Chainmail Sole Prop - Taxes/Accounting?

[GreenFlamesStudio]

I'm taking a hobby of mine and starting a small sole proprietorship business out of it - making chainmail (like the old armor) jewelry by hand. It will always be a side endeavor, but I'd like to eventually expand it into making a few other hand crafted things, and possibly building my own blacksmith forge. I plan to sell my work primarily over the internet, but I want to keep the option to sell to local folks as well.

I've been doing some research on the internet, but I think I just need a kind human being to de-mystify a couple of points for me.

I just received my DBA as a sole proprietorship, which even I understand as something that is pretty necessary :) I'll go file for a home occupation permit in my local village hall here shortly, which seems to be required for where I live.

Am I correct in thinking that if I sell anything, whatsoever, in my state of Illinois that I need to first have acquired an Illinois state business tax number?

Am I correct in thinking that I do not necessarily need a Federal tax ID number, because the business is a sole proprietorship it is tied to my own SSN... but, maybe I want a Federal tax ID number (FEIN?) to reduce putting my SSN on paperwork? Which tax form (forms?) do sole proprietorship folks use? Turbo Tax? Clarification would be really helpful, if possible. I have an old friend who is a former CPA that does my personal tax return each year, but I don't want to slam him with too many newbie questions immediately.

As far as accounting and records keeping - I don't see myself spending $200+ for computer software that can whiz bang through the complex stuff involved with a larger business. I have no employees or other complications - it's literally just me. Is there any software that would help me keep good records? Should I just mimick some Mom & Pop stores and keep a journal of anything financial at all - but back it up on my PC?

Lastly - am I overthinking all of this? I don't know if, for instance, I have to reach a threshold profit number before I need to worry about reporting any income.

I'm a US Army Special Operations Airborne veteran. I'm just trying to do everything ethically for the sake of my country and my own peace of mind, but having some human advice would be helpful.

Thanks very much for any help or advice.

[Evan]

If you do sell anything in IL, you will certainly be subject to sales tax and will need to register with the state to collect these taxes.

You are correct, that no EIN is required for your business, but it may be preferable if you do business with one large customer (say a store) and they request your tax ID #. It's a quick process, and honestly makes a lot of sense. One would also be required if you took on a partner OR if you hired any employees.

Sole proprietors use a Schedule C to report their business income and expenses. I suggest using some form of accounting system to track everything, and opening a business checking account exclusively for business transactions. Also, while you're not required to have a separate credit card for the business, I'd highly recommend even just keeping one solely for business transactions as it will just be much cleaner at year-end. Trust me. When my clients use 5 different credit cards for different transactions, especially if they're not seeking reimbursement, I do request that they provide all of those statements as well and go through to highlight all the business activity so we can ensure everything is properly included/excluded.

You do not need to use an accounting program and can certainly use Excel to create some kind of system. You can also take a look at Staples for some accounting books as well for guidance. Your accountant may also provide a software recommendation as well, though likely it'd be QuickBooks.

Finally, there is no threshold before needing to report income. You should be reporting all income.

[GreenFlamesStudio]

Thanks Evan! That's a really big help, I appreciate that you took some time to help lay it out to me :)

Glad to hear that there is no threshold. I have had a ton of people ask to buy things I've been making, but I have declined to sell anything until I get everything figured out and done properly. I'm glad that I havn't been turning down a good deal of business in vain!

I'll get myself a state tax number for Illinois transactions, and I'll get an EIN I think as well.

My bank has a free business class account, which is upgradeable with gadgets if I want them as the business hopefully grows. I'll bring my DBA in and get the basic one - even the most basic free one comes with internet banking, the ability to have folks pay you over a cell phone using a credit card, a business debit card so that I can purchase my materials and keep the records all in one business-only account, and some other odds and ends. I'll keep everything business related seperate from personal money that way, I hope.

I've been enjoying this website a lot. Kudos to the folks to lend their experience and time to help out newbies, and keep the whole thing running.

[GreenFlamesStudio]

I was able to do the FEIN and Illinois State Tax ID all online :)

Looks like both probably will take a few days to process.

[Evan]

Great. All you can do now is open a Square account and start accepting credit cards, and you'll "official" in no time. (Assuming you accept credit cards.) =) Best of luck!

[GreenFlamesStudio]

I opened up my business class bank account on Friday.

They also offered me a business credit card, but I didn't want one. I have a list of folks who are waiting to buy my products, and if I reinvest my profit back into materials, I'll be doing pretty well.

I was thinking that using only the small amount of cash I have invested in materials, and resupplying materials as product is sold, will keep things in a good balance. Forces me to stay in the positive.

Is it foolish to turn down the business credit card for some reason I may not be aware of?

[Evan]

No. If you don't need it, you don't need it.

[browndirt3]

I opened up my business class bank account on Friday.

They also offered me a business credit card, but I didn't want one. I have a list of folks who are waiting to buy my products, and if I reinvest my profit back into materials, I'll be doing pretty well.

I was thinking that using only the small amount of cash I have invested in materials, and resupplying materials as product is sold, will keep things in a good balance. Forces me to stay in the positive.

Is it foolish to turn down the business credit card for some reason I may not be aware of?

Using your own cash is a good way of staying on track with your personal spending, however, if you ever came across a situation where you needed extra money to expand what you're doing, then the business credit card would be an option if you had one.