Start off by reading through popular topics below. At the moment topics are outdated and will be updated in 2020.
Sole Proprietorship
When opening any type of business and you did not form a corporation or partnership, you are automatically classified as a Sole Proprietorship. You have complete (100%) ownership of your company and all income and losses passes through you and your personal income. Sole Proprietors usually sign business documents in their own name unless they are operating as another name (See Fictitious Business Name (DBA)).
Advantages
- Simple, easy to setup, low cost
- No shareholder/quarterly meetings
- No need to pay unemployment tax to self
A lot of low risk business prefer to keep their Sole Proprietorship status but higher risk businesses that involve food, dangerous equipment, serving children and other businesses should consider establishing a corporation to protect themselves and their business. When filing your taxes you must fill out Schedule SE (Form 1040).
Be sure to speak with an accountant to discuss the correct ways to settle taxes and file your income because an Sole Proprietorship is a pass-through entity. This means that your tax obligations will pass through your personal tax return.
Disadvantages
- Complete liability
- Cannot divide up business
- Cannot raise capital and give % to others
California Online Sales Tax aka California Internet Sales Tax
If you have not noticed already– in California we have to deal with our unfortunate Internet Sales Tax confusion. It seems that every time we think we have handle on our taxing customers we find ourselves with either a numerous amount of taxes to update or a new tax provision that we must follow. Currently as of 02/2013 taken from the tax rates of 01/2013 our California statewide sales tax rate is 7.50%. (Please visit the Board of Equalization California Sales Tax Rates for updated tax rates)
California Internet Sales Tax For In-State Purchases
For California Online Sales Tax, the Board of Equalization has mentioned that sales tax applies to when and where the delivery of sales took place. When and where payment is made is not relevant. In areas where you are engaged in business, you must collect the California Internet Sales Tax of 7.50% plus any applicable district taxes.
If your customer is purchasing outside your district for use outside your district and is in California, you are only required to collect the statewide California Internet Sales Tax of 7.50%. The customer is required to pay any addition California Use Tax on the item. Generally businesses would collect this Use Tax on behalf of the customer to remove any tax liability that the customer would have with the state.
Example:
If a retailer is solely engaged in business in San Jose but sends the shipment to a San Francisco address by common carrier, the San Francisco sales tax rate would apply. However, the business is only responsible for the statewide tax of 7.50%. The customer is responsible for the difference in the form of a California Use Tax.
California Online Sales Tax For Out-of-State Purchases
According to the California Board of Equalization you generally not required to collect California Online Sales Tax on purchases made and delivered outside California. This is applicable as long as the item will be for out-of-state use.
Visit the Board of Equalization’s Pub 101 Sales Delivered Outside California for more information.