Tuesday, July 21, 2009
Los Angeles City + Freelance Web Person = Business License
After I was 1099ed for some work that I did as an "employee" (not as a contract worker) in 2006 I was challenged by the city of Los Angeles for not registering as a business and paying special business fees. This was all ridiculousness, really, as I was an "employee" and working in Long Beach at the time. However the city, needing money, was going after people like me. In the end, paying their fees was easier than contesting the charge. I shook my fist at the clouds and vowed never to work for a 1099 again!!
But now that I've graduated I realize that freelance work is inevitably going to come my way as a web designer and developer and it will be simply easier to get 1099ed than to be hired as an employee for short duration projects.
Thus my quest to file for a business license begins!
Well let me tell you - it is NOT easy to figure out the gibberish the city puts out there on the web as "information"! So to make things easier for others I'm going to list the steps that I've figured out so far (and I'm not an expert so I can't promise you that this is the 100% correct way to do things!!). (Special thanks go out to my accountant friend Marci and my law student friend Adrea for assisting on this quest. If you need an accountant or a law student - send me a message and I'll connect you if I can.)
1) If you're a freelance web designer in the CITY of LOS ANGELES (not the COUNTY but the CITY) you will need a business license.
2) If you're in an unincorporated area of Los Angeles - you have different rules - the below list applies only to the people in the CITY of LOS ANGELES.
3) If you are operating as yourself - you will be a "sole proprietorship" or an "individual." If you want to operate under a name that is not yourself (for example, "Erin Is So Cool Company"), you will need to file a Fictitious Business Name Statement (a.k.a. "DBA") (find the form here: FORM LINK). Do a nice internet search to find a company that will handle the form, the filing and the publication because Fictitious Business Name statements need to be published in a newspaper for 4 consecutive weeks and then proof of that publishing needs to be sent to the county clerk. This gives any existing companies operating under that name time to say, "Oh hell no! We already own "Erin Is So Cool Company" and you can't have it." You can also avoid that possibility by searching for existing filings of the name you want (in Los Angeles County) at this search page: SEARCH LINK. Here's another shortcut for you - the Santa Monica Daily Press will handle the form, filing and publishing. They're a one stop shop. You can read their "DBA" policies here: Santa Monica Daily Press Link
4) Next you can apply on a Federal level (with the IRS) for an EIN (Employer Identification Number) - something you'd use instead of your own Social Security Number. The IRS has an online system (that operates only during business hours) where you can answer some questions and get an EIN right away: IRS EIN Page
5) Once that is done, or if you're just going to operate as yourself, you can now move on to getting the actual business license. Here's the funny thing though - it's actually not called a "business license" form or anything that might make sense like that. What you'll actually need now is a "Business Tax Application". You can find that form at the Office of Finance page here: FORM LINK. (See STEP 6 for info about the "Primary Business/Professional Activity Code".) If you want to know WHY you're filling out that form the gist is - if you're making money, you have to register to pay the taxes. You can either print that form in and mail it, email it or print it out and take it into a branch office. (Call 311 to connect with the city and find out where your branch office is.) Once you submit it, they'll get back to you with an "account number". (More information about this business tax registration can be found here: INFO LINK)
6) ON THAT FORM you'll see a line that says "Primary Business/Professional Activity Code". The full list of business codes is on THIS PAGE. Near as I can figure, the code you'll need for that part (if you're doing freelance web design) is 541400 which reads "541400 Specialized design services (including interior, industrial, graphic, & fashion design." You can also try "541510 Computer systems design & related services." Or maybe "541990 All other professional, scientific, & technical services". Your guess is as good as mine!
7) Exemptions! You can't have them until AFTER you're registered to pay taxes and the city sends you a renewal form. But here are some:
Now I've done things a little ass backwards but have tried to order them properly for you. If you're REALLY getting into setting yourself up as a business (rather than a person who occasionally accepts money for web design) then this kit, which goes through the small business set up steps in detail, should really help you out: The StartUp L.A. Kit for Entrepreneurs
Good luck!
But now that I've graduated I realize that freelance work is inevitably going to come my way as a web designer and developer and it will be simply easier to get 1099ed than to be hired as an employee for short duration projects.
Thus my quest to file for a business license begins!
Well let me tell you - it is NOT easy to figure out the gibberish the city puts out there on the web as "information"! So to make things easier for others I'm going to list the steps that I've figured out so far (and I'm not an expert so I can't promise you that this is the 100% correct way to do things!!). (Special thanks go out to my accountant friend Marci and my law student friend Adrea for assisting on this quest. If you need an accountant or a law student - send me a message and I'll connect you if I can.)
1) If you're a freelance web designer in the CITY of LOS ANGELES (not the COUNTY but the CITY) you will need a business license.
2) If you're in an unincorporated area of Los Angeles - you have different rules - the below list applies only to the people in the CITY of LOS ANGELES.
3) If you are operating as yourself - you will be a "sole proprietorship" or an "individual." If you want to operate under a name that is not yourself (for example, "Erin Is So Cool Company"), you will need to file a Fictitious Business Name Statement (a.k.a. "DBA") (find the form here: FORM LINK). Do a nice internet search to find a company that will handle the form, the filing and the publication because Fictitious Business Name statements need to be published in a newspaper for 4 consecutive weeks and then proof of that publishing needs to be sent to the county clerk. This gives any existing companies operating under that name time to say, "Oh hell no! We already own "Erin Is So Cool Company" and you can't have it." You can also avoid that possibility by searching for existing filings of the name you want (in Los Angeles County) at this search page: SEARCH LINK. Here's another shortcut for you - the Santa Monica Daily Press will handle the form, filing and publishing. They're a one stop shop. You can read their "DBA" policies here: Santa Monica Daily Press Link
4) Next you can apply on a Federal level (with the IRS) for an EIN (Employer Identification Number) - something you'd use instead of your own Social Security Number. The IRS has an online system (that operates only during business hours) where you can answer some questions and get an EIN right away: IRS EIN Page
5) Once that is done, or if you're just going to operate as yourself, you can now move on to getting the actual business license. Here's the funny thing though - it's actually not called a "business license" form or anything that might make sense like that. What you'll actually need now is a "Business Tax Application". You can find that form at the Office of Finance page here: FORM LINK. (See STEP 6 for info about the "Primary Business/Professional Activity Code".) If you want to know WHY you're filling out that form the gist is - if you're making money, you have to register to pay the taxes. You can either print that form in and mail it, email it or print it out and take it into a branch office. (Call 311 to connect with the city and find out where your branch office is.) Once you submit it, they'll get back to you with an "account number". (More information about this business tax registration can be found here: INFO LINK)
6) ON THAT FORM you'll see a line that says "Primary Business/Professional Activity Code". The full list of business codes is on THIS PAGE. Near as I can figure, the code you'll need for that part (if you're doing freelance web design) is 541400 which reads "541400 Specialized design services (including interior, industrial, graphic, & fashion design." You can also try "541510 Computer systems design & related services." Or maybe "541990 All other professional, scientific, & technical services". Your guess is as good as mine!
7) Exemptions! You can't have them until AFTER you're registered to pay taxes and the city sends you a renewal form. But here are some:
A) New Business Exemption!A business that establishes a new fixed location within the City and is not owned, in whole or in part, by a person that was engaged in business in the City in the immediately preceding tax year, shall be exempt from the applicable minimum tax for its first tax year of operation.
- B) If you make less than $100,000 a year (which you probably will unless you're an AMAZING freelance web designer) you can file to be exempt from taxes as a small business.
Small Business. No tax is required to be paid under this Article by any Small Business. A Small Business shall mean any person whose total taxable and nontaxable gross receipts from within and without the City do not exceed $50,000.00. The $50,000.00 amount shall be increased to $100,000.00 on July 1, 2006.
- C) Multimedia and Entertainment Exemption - Near as I can figure (and I could be wrong here) if you're in either the "Hollywood Redevelopment" or "North Hollywood Redevelopment" areas you may qualify for an additional exemption for being a person in the multimedia or entertainment business. This "Eligibility Questionnaire" definitely suggests that a web designer qualifies though you'll need your account number from the Business Tax Registration before you fill this out. (The info about Hollywood and North Hollywood comes from "SEC. 21.27. ENTERTAINMENT AND MULTIMEDIA BUSINESS TAX LIMITATIONS" in the Los Angeles Municipal Code and THIS PAGE on the Office of Finance site.)
- D) You can also apply to be exempt if you're a "Creative Artist" that makes less than $300,000 per year. The "Entertainment Creative Talent FAQ" is located here: FAQ LINK. According to the city's legal paperwork, a creative artist is someone who performs "Creative Activities" -- here's there lingo:
Creative Activities shall mean activities performed by Creative Artists primarily for entertainment and/or aesthetic purposes, including assistants or professional trainees performing those same Creative Activities, in the following professions:
1. The following professions to the extent they are directly involved with motion picture, radio or television productions, commercials, multi-media or recorded or live music or theater:
- Actor or announcer; or
- Art director, costume designer, production designer, scenery or set designer; or
- Choreographer; or
- Cinematographer; or
- Conductor of bands, chorales, orchestras, and other musical groups; or
- Director; or
- Motion picture editor, sound dubbing, special effects, or titling artist; or
- Writer (where the writing is the writer's own creative work, but not writing that is compilation, documentation or description of a non-artistic nature, such as technical writing, the writing of technical or scientific reports, etc.); or
- Music or lyrics arranger, composer or writer; or
2. Author of books, essays, poems or short stories; or
3. Cartoon artist, including animated media; or
4. Creator of visual fine arts, using artist's materials (i.e., lithographer, painter, sculptor, or the equivalent); or
5. Drawing, graphic, illustration or sketch artist; or
6. Performing artist, including comedian, dancer, impersonator, juggler, magician, mime, musician, or singer; or
7. Photographer, to the extent the photography is primarily artistic in nature and not primarily journalistic or commercial.
Now I've done things a little ass backwards but have tried to order them properly for you. If you're REALLY getting into setting yourself up as a business (rather than a person who occasionally accepts money for web design) then this kit, which goes through the small business set up steps in detail, should really help you out: The StartUp L.A. Kit for Entrepreneurs
Good luck!
Labels: business license
