women and handmade business chapter 1: start a legitimate business

Are you dreaming, hoping, and planning to start a handmade business this year? Whether you’re the type of person that dives in head first, or just likes to dip your toes in and slowly ease into things, the biggest thing you need for starters is information. What better way to gain the info you need than through the experience of other makers and sellers? This series will focus on hands on information designed to give you what you need to push you in the right direction to realize your goals this year. With firsthand knowledge on everything from choosing a business name and legal filings, to planning your products, and the advantages/disadvantages of different selling platforms, and tailoring your product photos, I’m so excited to begin this journey with you! Each post will feature a set of worksheets that will help you to use the information contained in the post to accomplish what you need to. Be sure to check them out and download for purchase to support the info that you’ve gained here!

For starters, I hate to break this to you, but starting handmade business is hard. Like starting any business, to be successful, you need direction, commitment, and at least a loose plan. That’s not to say that you need to know where you’ll end up when you get started. A lot of businesses start out as one thing, and evolve over time into something else. That’s okay. I started out selling fabric rings. I only sold a few. They were cute, but they weren’t cost effective, and didn’t have a very high price point, so they would have been tough to build a business around.  Back to the drawing board. So, I spent an afternoon with a bunch of random fabric I had in my stash working out a design for a camera strap cover. I tried a bunch of things, and eventually found a pattern that worked. That’s when I started down the path that I’m on today. The point being, rings, didn’t work, camera strap covers did for me. That’s my successful starting point, and I’m building from there.

Making, and organizing, buying supplies, and selling a finished product is hard work. It sometimes means late nights and long days. But I try to look at it as having the best of both worlds. I get to be home with our boys, AND chip in on our household income. But, honestly, the most fulfilling part for me? I feel this is where I belong and what I’m meant to be doing. The fact that I’m in the process of building a legitimate, income earning business around what I love to do is very fulfilling, albeit, tough at times. So, okay, business is tough, but fulfilling. Got it.

Have I scared you yet? I hope not. What I really hope is that you’ll see the reality of the good with the… not so good. And decide that it’s definitely worth it.

So, here’s the skinny. Before you can even begin to think about setting up shop or selling your wares, you need to file some paperwork. Assuming you’ve already got a name for your business in mind, everything should go pretty smoothly. (If you don’t have that part figured out yet, be sure to check out the related download for this post on “how to brainstorm a name for your handmade business”.) If you want people to take you seriously as a business, an owner, a designer, or a maker, nothing says it better than being legit. I’ll be honest. I’m damn proud to be a business owner – to have those papers and business cards, and proper bank info to back it up, too. It has nothing to do with the papers themselves, and everything to do with the courage and integrity it takes to get them.

First up: get legit
Nothing scared the liver out of me like contemplating filing the legal paperwork to have a business. Um. Yes. I’m serious. But having the irs knock on my door scares me more, so I set out to figure out just what I needed to do. Yes. I can be a chicken. On my lesser badass days. (After all of my research, I was still chicken and met with my friend Darinda, who owns The Waterbottle Soap Company. She totally helped put my mind at ease that I was on the right track doing what I needed to. And that’s really my goal with this post. To reassure you that you really can do this.)

You need to register your business with your state. If you’re located in another country, do your research and find out what you need to do to start out right. It’s scary, but I felt like that fear was a good thing for me. It helped motivate me, and it made things real.

The “knitty” gritty on what you need:

– a business license with your state.
Through reading several books on starting a business and talking to a friend that already owned in my state, I found out that here in the US, I needed to go to my state’s website to file for my business license. To find yours, just type in “your state” and add .gov to the end in a google search (iowa.gov, florida.gov, minnesota.gov, etc.). Look for the forms needed to file for articles of incorporation. My browser rolled over right away to the state government site, and right on the front page, there’s a link for business license filings. I just did it again for my home state, and bam! Right there. There are options for filling out printed forms to physically mail in with a check, or filing online using a visa, mastercard, debit, etc. With this filing, you’ll be using your personal account to pay the fees and set everything up. Also be sure to check into requirements in your state regarding DBA (doing business as – when you’re registering to do business under a name other than your own), and insurance requirements (there are certain requirements if you make beauty products, or if your services like photography can have possible accidents associated with your equipment, etc.)

You can register as a sole proprietor, a limited liability corporation, or a corporation. (I haven’t listed the partnership options – this is something you’ll have to explore if you’re partnering up with others to run your business.)

I’m registered as an LLC. I love that it gives me the advantage and protection of articles of incorporation as my business grows, but I don’t have to file separate corporate taxes. The state of Washington has a great chart that compares the requirements for the different types of filings. They vary a bit from state to state, too, so be sure to research.

Registering doesn’t usually cost much, either (I paid about $140 just a few years ago, and I think when I just checked, it’s currently about $150), but it comes with some cool advantages.

1.) You can purchase items at wholesale cost, which can help your business save a LOT of money. You’ll gain access to wholesale businesses for everything from materials to create your finished goods, to local wholesalers, to being able to purchase shipping supplies at a discounted rate through a company like ULINE.

2.) You can write off legitimate business expenses. Those supplies you’re using to make your finished goods? Write off. The gas you spend on post office runs to drop things off? Write off. Shipping costs and packaging supplies to send your goods? Write off. Costs to host your website, have your logo designed, list your goods on a shop site? Write off. Knowing that I can write off these expenses helps me sometimes be more willing to “take a leap” on doing something I’m thinking about. For example, this past year, I was carefully weighing the benefits on something like paying for a website and logo design, and I knew that those costs really would show up against my profits at the end of the year, instead of just coming out of my pocket. I still don’t plow ahead recklessly on expenses, but there’s comfort in knowing that.

Documenting these costs help show the true profits that you’re earning. Because if you’re just counting the money coming in, and not going out? Totally off. By being able to write off these legitimate expenses, it shows how much money your business really made. And that’s the amount you pay income tax on.

Once you’re registered, you’ll have to file an annual report each year. This pretty much just reconfirming that your business is still functioning the same way, and paying a fee to renew the license. Once you’ve done the initial registration, the state will be sure to send you a notice when you need to renew and file your report.

{part of this chapter’s printable download is a worksheet to help you with naming your business}

– register for a tax id number for your state.
This means you’ll collect state sales tax on purchases made by people that are residents on your state. It sounds scary, but it’s not. This is usually handled by your state’s department of revenue. Again. Google is your friend. I typed in “filing for a sales tax id in “my state”. Bam. Right there. For small, cottage industry type businesses like a handmade biz, you will be able to collect sales tax as you go, and simply file online to pay what you collect every business quarter.

– register for an EIN (employer id number) This is optional for starters. It’s another way for the irs to identify your business, and is especially important for when you grow to the point of hiring other employees outside of contract workers. Go to irs.gov to find the info that you need. (Even more specific information included in the worksheets.)

– open a business checking account. I think this is pretty universal here in the United States (I’d have to double check, but all research I’ve done so far leads me to think so), you can not use a personal checking account to run a business. If your business revenues are exceeding $3,000 in a year, you need to get this fixed. I think that I speak for all of us when I say that it’s our goal to exceed that, so why not do things right from the beginning? You just need to take your articles of incorporation and your EIN or social security number with you to the bank where you already have a checking account. We bank through a credit union – which we love, and when I called to schedule an appointment to set things up, it went one, two, three. I was in and out. You’ll want to be sure to bring all of your business registration information, your tax id number, and your personal photo id along. Be sure to mention when you call to schedule your appointment with the bank of credit union that you’re a small or cottage industry business. They usually have different options available for small business owners that involve low or no minimum balance. My credit union allows me to write ten checks per month fee free. And they issue a visa debit card with the account.

– set up a business paypal account. Now that you have your bank information, you have everything that you need to set up a paypal account. If you’re planning to do business online at all, you really can’t be without one. Most online businesses accept them as payment for purchases, and once you’re set up, you can, too. It’s also a great way to be able to ship packages, and even convenient to take debit or credit card payments in person if you’re selling at a local market. Paypal is very easy to set up, and a lot of people already have a personal one, the steps are very easy to follow on their website, so you’re on your way!

One final note. When you’re working online, be sure to be careful about your security. If you’re handling sensitive information, it’s not a good idea to use public computers, and always be sure to have security settings enabled on your personal computer, as well. If you need to set up passwords, be sure to follow instructions for good, strong ones, and DON’T use the same password across all of your different accounts.

That’s it! You’re settled. Now you’re ready to embark on your handmade business journey! Awesome! Give yourself a pat on the back. Or if you’re like me, pour a big, fat, drink. It really is an accomplishment to get this far, and you’re fabulous!

Please note. I’m sharing my own experience here – the point being to help educate you and ease your transition into owning a handmade business. If you truly have questions and concerns on your business registration, tax id number, EIN, or business checking account, be sure to connect with someone like an accountant or lawyer that can answer questions related to your specific situation. I’m so blessed to have found a local accounting firm that’s totally down with a mom that’s running a home-based, “cottage industry” business. They charge our family a fair fee related to how much time they spend with us. And they know the numbers on my business. And when I have a question, I can call them up and they’ll honestly give me an answer to make sure that I’m doing things the right way. I meet with them once a year to go over our taxes. And they take care of us. And the fee they charge? Totally worth the peace of mind. I can’t recommend it enough. There is a time and a place to use a professional, and this is totally one of them. I love that they can specifically answer questions on legitimate write-offs for expenses because I tend to be overly cautious and NOT take things that I could.

Chapter one downloadable/printable worksheet packet includes:

– a downloadable/printable version of this blog post for reading and reference.
– legal filings worksheet
Cross your t’s and dot your i’s. This checklist will help you remember what you need to do, and what paperwork you need to bring with you for your filings.
– brainstorm a name
Not sure yet what you want to call your business? Avoid the pitfalls of the name game by filling out this worksheet that will help you brainstorm ideas based on your product, target market, brand identity, and aspirations for your brand. Think about word associations that can help or hurt your business.
– product possibility
Are you marketing a product, or a service (designing things or offering tutorials or classes)? Having at least a broad idea of what you want to be doing as a part of your business helps you determine the name and feel for your business going forward. This will be general for starters, and we’ll go into more depth in a later lesson focussins specifically on product development, pricing, sourcing materials, etc.
– recommended reading list. If you’re looking for books on starting a handmade business that have inspired me, I’ll have a list for further reading in the download packet
– a total of eleven pages of information + a title page

Be sure to subscribe to blog and stay posted! I have some awesome guests lined up to share their experiences building their businesses. You can also check out other blog posts in the series by clicking the Women and Handmade Business tab and following along. Previously posted topics include:
– Why I Chose Etsy for my Handmade Business
– Tips for Crafting a Great About Me Page
– Three Tips for Keeping your Branding Fresh

Each time a new blog entry with a worksheet is posted, there will also be a newsletter update. You can subscribe to those here.

I hope this information is helpful for you! Please, be kind, and don’t share this information on your own blog. I’ve put a lot of time and effort into building this as a place to educate and encourage women in following their dreams. These are my words, not paraphrased or taken from anyone else. As such, be sure you link here to share the information, so that I can keep doing what I love and helping others do so, too! Thanks so much for your support!