Don't get hung up on having a business checking account.

June --

I am starting a side business while currently employed. Trying to stay under the radar from my boss knowing about this (so please don't print unless use a different name and state).

Due to financial difficulties, I am unable to get a business checking account so I plan to use one of my personal bank accounts exclusively for business income and expenses. I use a different business name than my real name but intend to put on my invoices to make checks out to my real name.

My question is do I need to file a fictitious name with the state?

Jane Noname
Utah


Hi Jane Noname,

First things first: Read this You Do Not Need A Business Checking Account. You'll see there that as a sole proprietor who is not an LLC that there are time and recordkeeping advantages to not using a business checking account. Also, note that There are many other posts on checking accounts in my blog right here checking account .

I do not recommend sending an invoice in one name and asking to be paid in another name even if it is your own. People often do that to skirt around claiming income and it gives a non-professional feel to things. Why not bill in your own name and use a clever tag line under your name that relates to or describes your business?

You don't say what you do so I can't give you any suggestions on a name but ask your bank if a check made out to, say, Jane Noname Services would be acceptable into a Jane Noname checking account.

Here's some posts on using a business name DBA - Doing Business As .

-- June

Forced to incorporate is a quirk of the company.

Hi June,

I'm a New York City Indie Sound mixer for TV, 10 years. Thanks so much for your very informative web site.

I'm so confused this is the second company that has sent me an email with this content. "Hi Sheila, Helen forwarded your invoice and w-9 form to me – however, we cannot pay you via a w-9 form. Because you are not incorporated, we need to pay you via a w-4 and withhold payroll taxes. You will be issued a w2 for 2010 tax reporting purposes. We are obligated to follow the instructions of New York State Department of Labor. Please complete the attached, including a signature and a withholding exemption amount on line 5. You may email it back to me, mail, or fax." I have not sent a reply to this request.

I am wondering if i should incorporate (which you don't suggest). Some years ago I used a DBA. I could I use the name I used then to get a tax id number and set up a bank account and ask this company to issue me a 1099 to the DBA?

If all my vendors start doing this will I lose my ability to deduct.

I welcome your comment.
Sheila


Hi Sheila,

If you are legitimately self-employed then there is no New York state department of labor law that says you must incorporate or you must be an employee. That demand is a quirk of the company.

Here's my post with good overview of the requirements for self-employment: Employee vs. Self-employed. And here's a post of someone in a similar situation: Forced to be an employee!

If the company will accept a federal ID # or a DBA [doing-business-as meaning a name other than your own] or even an LLC then by all means do one of those rather than work as an employee or even more cumbersome and expensive, forming a corporation.

Would be great if you could get me a copy of the instructions of New York State Department of Labor that Helen says they are obligated to follow.

Pleased that my site is helpful. Thanks for letting me know.

-- June

Don't incorporate just because the big boys tell you to.

Hi June -

GREAT info, i could spend hours reading your fantastic advice!

A couple questions please: 1. I just completed a 3 week freelance job - they want me to incorporate to be paid (they have Department of Labor issues) - I think this is crazy and makes little sense, which I told them.

They then asked me to do an EIN with a DBA, I'm slightly more open to that, although I still think it's a lot to ask (and potential cans of worms for me) for just 3 weeks of pay.

They claim they can't do 1099 because of their upcoming audit, can't take chances. Any ideas?

2. Once this job is over, I will file for unemployment (I was laid off prior to this 3 week gig) from a major corporation. Will any of the above scenarios prevent me from collecting? Because I don't want to jeopardize unemployment (I'll need it to fill gaps between freelance assignments) by filing a sole proprietorship EIN, etc - that would be truly unfortunate.

Thanks for your help!
Kelly
PRODUCER, JUST BEGINNING!
BROOKLYN, NY


Wow, Kelly! What an endorsement. Hours reading tax stuff. Thanks.

Many corporations attempted to skirt around the regs dealing with employee versus self-employed so that they could save about 25% to 30% in payroll taxes and employee benefits. They cheated. Some got caught. What often happens is that they devise ways that "look good" but really aren't so good.

By that I mean, the corporation will hire someone who should be classified as an employee but instead hires that person as an indie. The corp then insists that the indie incorporate in order to cover its own rear-end should there be an audit.

Don't incorporate unless the three weeks of income is really, really a lot of money.

An EIN and a DBA is no problem for you. Just a little extra work. Check these posts on EIN-employer identification # and these on DBA - Doing Business As . If your bank won't accept payments to your DBA name then you'll need to open another bank account.

Each state's unemployment regs are different. Check New York's requirements before you take any action. Might want to read these posts first unemployment compensation .

Best,
June

More On EINs (Employer Identification Number)

Use may use your Social Security Number as your sole proprietorship’s identifying number, unless:

• You must withhold taxes from a subcontractor you've hired.
• You hire one or more employees.
• You set up a self-employed retirement plan (does not include a SEP).
• You are an LLC
• You deal in products that require you to file a Federal excise, or alcohol, tobacco and firearms return.

If one or more of the above applies to your business, you will need to get a nine-digit employer identification number (EIN). An employer identification number, as with many IRS terms, is incorrectly named. All employers must have an EIN but, as you can see from the list above, it's not only employers who must have one.

In the United States everyone must have a Social Security number. Hospitals give them out when a child is born. Think of an EIN as a Social Security number for a business.

Many of you have asked whether you need to get an EIN. Here's a cheat sheet to guide you. The links take you to the EIN application process.

You will need an EIN if you answer "yes" to any of the following questions. If you answer "yes" go here to learn How to apply for an EIN or click the YES .

Do you have employees? YES NO

Do you operate your business as a corporation or a partnership? YES NO

Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? YES NO

Do you withhold taxes on income, other than wages, paid to a non-resident alien? YES NO

Do you have a self-employed pension plan other than a SEP? YES NO

Are you involved with any of the following types of organizations? Trusts, Exempt Organizations, Estates, Farmers' cooperatives? If yes. talk with a tax pro.

Note that the IRS now requires an LLC operating as a sole proprietorship to have an EIN.

Here's a couple questions on EIN from my readers.

Hi June! (it's my mother's name, too!)

I am an Actor-Filmmaker living in New York City and have been an indie for 8 years. I am getting married in September and I will be taking my husband's last name. However, I would like to keep my maiden name so I can keep my stage name, accept checks, sign contracts, etc. I am thinking of filing a DBA form. Is that the right move? If I do, do I need a Tax Identification Number from the IRS (this was an option for an additional fee on LegalZoom.com and I'm not sure I need it)? I guess I'm also confused how to use the DBA with my bank account and keeping tax records.

Any advice for a struggling artist?

Thank you so much for supporting us indies! Your support means a lot! I look forward to hearing from you.

All the best,
Sarah


Dear Sarah,

I have many clients who use a maiden name as well as a married name or a hyphenated name with both. Some guys use both a birth name and a stage name. No DBA is required.

Check with your banks and see what they require.

It's a legal situation so best to check with a lawyer, however, I suggest signing contracts with both names.

No you do not need an EIN to use both names.

Happy September wedding!
June

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Hi,

I went on Amazon.com to find a book to help me with taxes. I saw your book, and plan on getting it. However, I have a few questions that may not be in your book, because they have to do with my occupation and a Fictitious Name. I'm thinking of doing graphic/website design here in Florida, generating work from an office in my home. I would perhaps have clients in various parts of Florida and perhaps out of state, via the Internet. The business would be just me; no employees.

Someone suggested that I use my social security number for tax purposes, rather than get an EIN number. And, I'd rather have a Fictitious name, other than mine, appear on my business cards, letterhead, and such.

Is it possible to work as a graphic/website designer without the need of an EIN number, and have a fictitious name?

I look forward to reading your book, since the reviews are all positive.

Sandra


Dear Sandra,

The feds do not require you to have an EIN for a fictitious name. However, since you will have checks made out to you in your business name, your bank may require it .

Best,
June

DBA is not a business entitiy.

June,

I read your website column, How does a self-employed pay himself? and need to know if the answer to that question applies for DBA businesses as well.

I opened a business checking account under the name NY Techquest, and I have deposited all payments to the business into this account. My question is: Is it legal for me to withdraw these funds to use for personal purposes?

Everything is under my personal SSN, and I have not applied for a business license in the state of NY.

Please advise.

Thank you,
Janet
New York City, NY


Dear Janet,

Before you do another thing regarding your business you need to get a lot more information. DBA is not a kind of business structure. DBA stands for "doing business as" and simply means that you are not using your own name as your business name.

Go here DBA - Doing Business As to view several posts on this blog about DBAs.

After you know what business structure you are -- for instance, sole proprietorship, partnership, S-corp -- then you can determine whether you can just take money out of the account or whether you need to be n payroll.

Best,
June

Going Legit

June --

I am a website owner and operator. I make money from ads.

I haven't really made that much in the past 5 years or so (or paid taxes) but this year, it has really taken off. I don't have a DBA or anything like that, but I really need to get everything legit. I can't even get a loan or a credit card because as far as everyone knows I haven't had a job for years. But I made about $10,000 last month alone. Reading various articles on your website has me a little scared to go to a local cpa. I'm not sure what I need to do.

Brian from Juliet, TN


Hello Brian,

Yours is not a unique situation.

For starters you do not need a DBA. For more info, read this DBA: Doing Business As -- It's just a name .

You may be able to get a "no income verification" loan. That means the bank doesn't look at what you earn but what you own.

Some credit card companies will give you a card with a very low credit line. After several months of proving yourself a good risk, upon request, they will increase the line of credit.

You do not need a CPA, you need a tax preparer with knowledge about taxes for the self-employed and experience working with indies. There are several posts here about picking a tax pro. Whether or not you get the right pro depends on on how you go about looking for one. As these posts point out, you need to ask the right questions when you interview him or her.

Keep in mind that as an indie you are responsible for your financial well-being. That means you need information about taxes and recordkeeping and a lot more. If you like what you read on my blog and website, I encourage you to buy a copy of my book, Self-employed Tax Solutions. The book answers many of the most common self-employed questions in the same easy-to-understand style you'll find in my columns.

Best of luck!
June

Multi-faceted Sole Proprietorship

Dear June,

Thanks for the great site! I am a teacher/tutor/editor/writer.

This year, I have taught part-time at a university and worked as a temp. I want to set up a tutoring business. I was advised that I could cluster all my writing-tutoring-etc. earnings together by starting a "sole proprietorship" in my own name. 1. Is this true? 2. If so, wouldn't it be better to register it officially? (one of your pages starts by saying you needn't, and then goes on to say there are many situations where you do).

I like the "one name" idea so I could put the income streams together, though I prefer a trade name for privacy reasons.

However, given my situation, what would you suggest is the best way to go forward.

Thanks for your help!
Anna from California


Hello Anna,

Glad you like my site. Thanks for letting me know.

Yes, all elements of your business are related and so you may be one sole proprietorship. [Of course, this does not include any income as an employee.]

I don't know what you mean "register officially." Other legal matters you must take care of depend on on local law and state sales tax. However, those requirements have no bearing on your being a sole proprietorship.

A trade name -- DBA, doing Business As -- does not mean that you cannot be a sole proprietorship. See the "business name" category on the left.

All indications are that sole proprietorship is all you need. If you haven't already, be sure to read , I am a Business on my website.

Do I need a business license?

June,

My position was eliminated from my company but I am approved to be an outside consultant (speaker). Should I get a business license or DBA? They will pay me via 1099. Right now I have 2 engagements lined up but hopefully there will be more in the future.

Thanks.
Kim


Hello Kim,

You do not need a DBA. Read DBA: Doing Business As -- It's just a name to understand what DBA means. Also, you need no license unless your profession requires it. Here's a column on my website you might want to check out I am a Business.

Wish you success!
June

DBA: Doing Business As -- It's Just A Name

Good afternoon, June,

Can a DBA have its own invoices, purchase orders and so on? Where can I find out about my responsibilities and my rights.

Thanks John from Forrest Cypress, TX


John,

DBA means Doing Business As and is just another way of saying that you John Jones are naming your business something other than your name. Perhaps you've named your business, "John's Business."

Take a look at this column DBA:Doing Business on my website.

DBA is not a business structure or business entity. You could be called John's Business were you a sole proprietor, corporation, partnership -- doesn't matter. There's more info on this at my blog post Which business entity is best?

Yes, you may write purchase orders using your business name. You need to check with your bank about depositing checks made out to your business if you don't have a business account.

John, I can tell from your question that you need a lot of basic information, too much for me to provide in one email. I recommend you start by reading a short column on my website, like: Is it a deductible business expense? and Estimated Taxes, a post on my blog.

If you like what you read there, I encourage you to buy a copy of my book, Self-employed Tax Solutions. The book answers many of the most common self-employed questions in the same easy-to-understand style you'll find in my columns.

Best regards,
June Walker

DBA:Doing Business As

June,

I have become self-employed and would like to know if I need to file a DBA. I began sub-contracting wireless engineering services for a major contracting firm as a 1099 employee. Any information would be helpful as I am quite new to this game.

Best regards,
Brian

Dear Brian,

Congratulations on your new solo venture!

By the way, to clarify a term, as a self-employed you may call yourself a freelancer, or an indie, or a sub-contractor, or a free agent, but you can no longer call yourself an “employee.”

“Doing Business As” shortened to DBA, is needed only if you use a name other than your own as the name of your business. In that case you would register your “trade name” with the county clerk. The purpose of registration is to make sure that no two people in the same county use the same business name.
You can find a lot more info on being self-employed at http://www.junewalkeronline.com/ .

And, as always, read the book that can simplify your tax and financial life, AND save you money!
SELF-EMPLOYED TAX SOLUTIONS .


Cheers,
June