Easy but Important
Legal and Financial Steps for Setting Up
Your Successful Home Jewelry Business
by Rena Klingenberg.
It’s easy to start a jewelry business.
Taking care of a few legal and financial steps is an important part of getting set up.
Here’s what you need to know about choosing and registering your jewelry business name, obtaining your business license and resale tax number, setting up a separate bank account for your business, dealing with the IRS, and more.
If you’re already selling your work but haven’t taken the steps listed in this article, it’s not too late to set yourself up professionally!
Don’t be intimidated by any of these steps when you start a jewelry business.
They are all quick and straightforward, with a small amount of forms to fill out and usually only small fees to pay. It’s worthwhile to get set up legally and operate professionally!
I’m not a lawyer or an accountant . . .So please note that while I’ve researched this information carefully, none of the information in this JewelryMakingJournal.com website is intended to be legal or financial advice.
Please use your own good judgment in determining when the services of a lawyer, accountant, or other professional would be appropriate to your situation.
Choose Your Business Name
One of the most exciting parts of starting a jewelry business is choosing your jewelry business name. Your business name is an important part of your image as a jewelry artist, defining who you are, what you do, and what style of jewelry you create. It will be on all your business literature, your website, and much of your packaging.
Here’s a mistake I made when I first started my jewelry business – I chose a name that my business wound up outgrowing as it evolved. When I began my business I made only bead earrings and nothing else. I named my business “Rena’s Beads” (I know, not very imaginative!) and went along very well with it for the first few years.
Then I added wire work and some other new elements to my jewelry line, and suddenly less than half of my inventory had any beads at all.
“Rena’s Beads” didn’t fit my jewelry business anymore, but unfortunately not only was it the name of my website, it was also printed on my jewelry tags and earring cards, my business cards, my self-inking stamp, and everywhere else.
I spent some time coming up with a new name that I don’t think my jewelry business will ever outgrow: “Rena Jewelry”. That’s what my friends have always called my jewelry, and my uncommon first name makes it unique.
Then I had to go to the trouble and expense of changing Rena’s Beads to Rena Jewelry everywhere – my website URL and all my printed materials. I also forwarded all pages of the old Rena’s Beads website to the new Rena Jewelry website. It was all a huge pain.
When deciding on your jewelry business name, I recommend using either all or part of your own name, or an intriguing word or phrase that gives an impression of your work. Many famous designers’ jewelry is known by the designer’s own name, and you may want to go this route too.
On the other hand, there are many art and craft businesses with cool and interesting names that have nothing to do with the artist’s name. You have the fun of deciding how to express your jewelry in your business name.
Whatever you choose, just be sure it’s not a name that limits your business so you won’t outgrow it. I’d like to save you from the hassle I went through of changing your business name on everything a few years down the road!
Register Your Business Name
Now that you’ve got the perfect business name, the next step when you start a jewelry business is to be sure no one else is already using that name, and then register it to protect it.
Registering your jewelry business name is important, because even if you’ve been operating for years under your business name, if you haven’t registered it, someone else could register it tomorrow and you would lose the right to use that name.
First, check the web to see if someone else has registered your chosen business name in your state. You can find your state’s Secretary of State office and locate the business name registration area on your state’s website.
Most states’ Secretary of State websites have a business name search feature and information on registering your chosen business name in your state.
You can also contact your county clerk for the procedure and form needed to register your business name in your local county. Your county clerk’s phone number should be in the government section of your phone book.
Finally, you can trademark your business name and logo for national protection. For this you’ll need to go through the “trademarks” section of the U.S. Patent and Trademark Office. There will be some paperwork to fill out and a fee to pay.
Get Your Business License or Permit
Every locality has its own regulations regarding a business license or permit for home businesses.
Where I live, I’m outside the city limits so according my local laws I’m not required to have a license for my jewelry business.
To find out what licensing your jewelry business is required to have, call your county or city clerk’s office, which should be listed in the government section of your phone book.
If you do need a license, there is usually just a one-page form to fill out and a small fee to pay.
Get Your Resale Tax Number
Another step when you start a jewelry business is to register with your state’s Department of Revenue Sales Tax Division. You can find your state’s department of revenue online or in the state government section of your phone book.
You’ll have to fill out a form and pay a small fee in exchange for a document with your tax exemption number (also called “retailer’s occupation tax registration number” or “resale tax number”).
This number enables you to buy materials from certain suppliers at wholesale prices with no sales tax. However, depending on the supplier, you may have to buy a minimum dollar amount or a minimum quantity of items to make a purchase.
Once you register with your state’s Department of Revenue, you’ll be required to fill out and return quarterly state sales tax forms regardless of whether you’ve made any sales in the previous quarter.
Sales tax forms are usually short and easy to fill out, and if you’ve collected any sales tax during the quarter you’re reporting on, you’ll need to include a check for the tax collected.
Sales tax is figured based on where the sale takes place. You’re required to collect sales tax on all items you sell directly to individual consumers within your own state, and at shows or other in-person venues in other states. But if you make a mail-order or online sale to a customer in another state, no sales tax is owed or collected.
Of course, it’s illegal to collect sales tax and keep it yourself. You must mail it in with your next quarterly sales tax form.
You don’t need to collect sales tax when you consign or wholesale your jewelry to shops or galleries. The shop or gallery is responsible for collecting and reporting the sales tax since they make the final sale to the individual customer.
When you consign or wholesale your work to shops, you’ll need to obtain the resale tax number of each shop you consign or wholesale to.
That’s the proof you need that the sale was to a reseller and not to an individual customer, and therefore that you have no sales tax responsibility for the transaction. If you’re ever audited, you’ll need this information.
Sales Tax and Permits for Shows in Other States
When you sell your jewelry at a show in another state, you may need a sales tax permit for that state.
Each state has its own requirements – some issue a temporary sales tax permit for the duration of the show, while others require the standard permit.
Be sure to find out what you’re required to have; tax authorities do occasionally sweep through art/craft shows and shut down any vendors who don’t have the proper paperwork.
You are also held responsible for charging the correct the sales tax required for the location where you’re selling your jewelry (due to varying local taxes, the sales tax can differ from one town to another in the same state).
Find out about the paperwork you need and the sales tax percentage to charge by contacting the particular state’s department of revenue online; be sure to ask about the sales tax and paperwork requirements for the specific city where the event will be held.
Don’t be intimidated and let this little procedure keep you from doing out-of-state shows! It’s not at all difficult, and once you’ve done it you’ll breeze right through it every time.
Understand Basic IRS Regulations
There are two things I highly recommend when you start a jewelry business, that will help you cruise effortlessly through small business tax and financial issues without confusion or fear:
- Visit the IRS Small Business / Self Employed website. For a government agency, the Internal Revenue Service has done an excellent job with this website, making information very accessible and easy to understand for ordinary folks like us. In particular, please visit their page on starting a business.
- Use the services of a professional accountant. A public accountant or CPA who specializes in home businesses can save you immeasurable time, frustration, and money every year. Accountants are not necessarily expensive, and a good accountant stays up-to-date on all the latest tax and financial laws, forms, and quirks.Not only will an accountant be able to assist with all your tax forms and know all the legal ways to reduce your tax burden, but he or she will also be able to answer any financial or tax questions that arise during the year.I’m an artist, not a financial analyst, and my accountant’s small fee is worth its weight in gold to me! (Note: My accountant often orders jewelry in exchange for accounting services, and makes the appropriate tax entries for our barter.)
Also, at some point you may want to consider setting up your jewelry business as a limited liability corporation (LLC). Your accountant can give you some guidance on when and why you might want to choose an LLC business structure.
Open a Separate Bank Account
for Your Business
Another vital step when you start a jewelry business is to open a separate bank account for operating your business. The IRS requires that you have a clear separation of business and personal income and expenses.
Your business account is where you’ll deposit all income from your jewelry business, and pay all expenses. You can write yourself a check from your business account and deposit it into your personal bank account to pay yourself from your business profits.
You don’t necessarily need to set up a “business checking account”.
A separate personal-level checking account set up in your name will fulfill the IRS requirements for separate business banking, and cost less in fees and other expenses than a business-level checking account. Just use this separate account in the same way you would if it were a business-level account, keeping your jewelry business income and expenses separate from your personal ones.
Keeping your business and personal finances separated in their own accounts also helps you with your business record keeping.
Imagine how complicated everything would get if you had only one account, depositing your jewelry business earnings into your personal account and paying for jewelry supplies, art show fees, etc. with your personal checkbook. When you got your bank statement at the end of the month, how would you know which deposits and checks were for business and which for personal?
How would you even know if you were operating at a profit or loss?
There’s No Reason to Put It Off
It’s easy and inexpensive to start a jewelry business with all the legal and financial steps taken care of.
You can operate more smoothly and professionally if you follow the steps listed here.
And if you’re already operating a jewelry business but haven’t taken care of these legal and financial steps, it’s never too late. Set yourself up professionally and enjoy operating your successful home jewelry business!
Get My Simplest, Most Profitable Strategies
for Selling Handmade Jewelry
In Easy Ways to Sell Your Jewelry Every Day I share all the details of the easy strategies I’ve used the most in my own successful jewelry business.
These are simple ways to sell your jewelry without craft shows, shops, parties, or selling online.
The details include how to get started if you’ve never sold your handmade jewelry before.
More on How to Start a Jewelry Business:
Starting a Jewelry Business
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Is It Time to Quit Your Day Job for Your Jewelry Business?
Nina Cooper discusses how to know when it’s time to quit your day job to work on your jewelry business.
How Catherine Accidentally Started a Jewelry Business
Catherine D’Arcy didn’t intend to start a jewelry business. But by a twist of fate, a misunderstanding resulted in the beginning of her jewelry inventory – and an eventually successful business.