Getting paid for a service as an individual vs as a company


2

I am interested in offering services like computer repair or programming. However it's not a business I will be running. It's more like getting paid for helping. This "help" is an extra source of income and I might put some ads in Craigslist.

Let's say I develop an app for another person or a company, is it OK for them to pay me through a check to my name? I am asking this because I don't want to go through opening a business, paying for a business license and all the paper work. My "work" is basically informal. I am not looking for legal advice to take with me. Just for a ballpark informal advice.

Payments

asked Nov 29 '10 at 07:04
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Tony Henrich
283 points
  • Get real. If you are doing business then be a business. – Ross 8 years ago
  • What country do you live in? – Joel Spolsky 8 years ago

3 Answers


2

This is exactly the kind of work that falls within the context of a sole proprietor. You can typically register them online and for relatively cheap.

That said, I wouldn't be too concerned about accepting some payments in your own name if you're just getting started. Just be sure to include this income on your tax return. The reason you register as a proprietor is primarily to reduce your tax hit on this kind of extra income; and plus you can claim business related expenses against your personal income - but if you only are doing this every once in a while the tax savings will be negligible anyway.

answered Nov 29 '10 at 07:20
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Mr. Schwabe
147 points
  • @mrSchwabe is correct. You can be a sole proprietor, use your own social and name for work. If you want to get fancy, and do it cheaply, you can simply file a DBA (around 20 - 50 bucks depending on your city), and get a business lic for around the same, and you are good to go. Then you can accept checks using that dba name too. This is a cheaper route as compared to setting up an entity such as an LLC or Corp, plus you get to use your own social. Do a few jobs to your own name, save a little cash and setup the DBA. If you blow up, then upgrade to a corp or llc. – Frank 8 years ago
  • @mrSchwabe - good answer with two corrections: (1) They are not ususally done online, they are done at your local city hall. (2) The reason you register as a proprietor is because your city legally requires you to do so. "Registering" is actually called getting a business license and it enables you to legally conduct business in your city. – Keith De Long 8 years ago

1

If you plan to do a couple transactions a year and the work is low risk then you can accept the checks and you just need to declare it as income for tax purposes.

If this money starts to become a couple thousand or more and the risk goes up you may want to consider looking into setting up an LLC or something like that.

That could potentially help protect you personally from any lawsuits related to the business. However, being a one man business it's a lot harder to separate the two.

Anyway you cut it, it's a business.

  • When I refer to risk, I primarily mean someone suing you for messing up their computer, or losing their files, or deleting something they didn't want deleted etc.
answered Nov 29 '10 at 07:54
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Ryan Doom
5,472 points

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However it's not a business I will be
running. It's more like getting paid
for helping.

If you ask anyone from the finance office they will call this argument bullshit. Like that - and send you a fine.

If you do something to make money it is per definition a business. Point. It may not be a company, but it is a business. Saying "hey, it is more like helping people" - well, seriously, Honda is also not a business. They basically help people to get cars etc.

Let's say I develop an app for another
person or a company, is it OK for them
to pay me through a check to my name?

Depends on legislation. Which country you said you are in? Oh, you did not say. See, "taxes" is not something that is globally the same. Depending on legislation it may be legal (you have to declare as income), legal (they have to pay taxes on top what they pay you) or illegal.

My "work" is basically informal.

Ah - no. It is work for hire. Or it is selling software. Whatever it is, if you do it regularly and a lot (not a single check) you will get into arguments with the tax office about that not being a business. Arguments that will cost you a LOT.

And dont forget to put that income on your tax declaration. Informal or not - it is income.

answered Nov 29 '10 at 07:14
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Net Tecture
11 points

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