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Licenses needed for Homemade/Craft products sold Online only?

by ssb, Window Shopper

  • Created: February 25, 2011, 1:26 pm
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I have sewing and embroidery work I have done for years and I am thinking of selling them online. I found websites I can create and checkout is processed with Paypal. Some items I make completely on my own while others I purchase (such as tote bags for example) and then add embroidery to them. I live in Missouri. Do I need to have specific licenses in order to sell my items?  I wanted to start selling them and see if there is enough interest and sales generated before becoming an official business. Is this possible?  Help!

Tags: Discuss Popular Topics, Self Employed & Home Based Business
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BizResearcher | Window Shopper | 3/1/2011 - 12:17 pm

The IRS recognizes two types of money-making activities, those that are businesses and those that are considered hobby businesses. You might start as a hobby business and then become a real business if you have the sales. However, as a hobby business you will be able to deduct expenses only equal to income; you would not be able to take a loss. As a business, you would be able to deduct all expenses, even if you show a loss. You may want to register your business name, which would create a sole proprietorship. The cost isn't much and, if you find that things don't work out, it is easy to cancel.

MarkAse | Contributor | 3/10/2011 - 4:25 pm

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The IRS recognizes two types of money-making activities, those that are businesses and those that are considered hobby businesses. You might start as a hobby business and then become a real business if you have the sales. However, as a hobby business you will be able to deduct expenses only equal to income; you would not be able to take a loss. As a business, you would be able to deduct all expenses, even if you show a loss. You may want to register your business name, which would create a sole proprietorship. The cost isn't much and, if you find that things don't work out, it is easy to cancel.
The sole propietorship thing usually works pretty well in these cases. An LLC in some states is even better based on protections and cost (free in Nevada, $900+ yearly in California, I have no idea in Missouri). Normally speaking, every state is going to have a different threshold for when you cross the magical line from hobby to business. How much are you currently selling?
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