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    Home»Personal Finance»Can you be independent without having a business?
    Personal Finance

    Can you be independent without having a business?

    October 30, 20222 Mins Read
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    JThe IRS states that if you do odd jobs for money, occasionally sell news, or have both a day job and a side business, you are considered self-employed in the UNITED STATES.

    Even if you occasionally declare a loss, what matters is that you were operating your business with the intention of generating a profit.

    Unless you decide to form a corporation, LLC, or some other type of business structure, your business is a sole proprietorship.

    Self-employment income is reported on Schedule C, and the earnings are taxed as personal income.

    The Difference Between an Independent Business Owner and a Hobbyist

    You are a self-employed business owner if you operate a trade or business for profit. The IRS argues that you are an amateur if you do what you do more often for fun than for profit.

    You can use the IRS list of criteria to determine if what you are doing is a business or a hobby.

    Consider selling bread, muffins and pies that you make at home. You run a business if you advertise, set up shop at the neighborhood farmer’s market, or negotiate with local retailers to sell your produce.

    You’re probably a hobbyist if you only cook occasionally or only when someone asks you to, or if you only sell your produce at cost.

    The $400 threshold

    An important benchmark in the Independent Business Owner world is $400.

    Say, for example, you start a home-based business while still residing with your parents. The IRS Small Business Tax Guide indicates that you may not need to file a tax return if your net business income is less than $400 after expenses.

    Have a business without creating a company

    Being self-employed is possible without having a formal business entity like a partnership, S corporation, or LLC.

    A sole proprietorship is the most basic type of business structure, and these don’t have any kind of structure.

    According to the Small Business Administration (SBA), there are no formal prerequisites for starting a sole proprietorship that are equivalent to submitting articles of incorporation. The decision to start a business is all that is needed.

    Unless you have chosen another legal form, if you are currently making money singing in local clubs, making jewelry at home, or grocery shopping for housebound neighbors, you are a sole proprietor.

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