Do I need to apply for a business license?
January 22, 2003
Date: Wed, 11 Dec 2002
I am currently considered a subcontractor. The service I provide is cleaning. I receive a 1099 each year and I do not have a business license. I do not wish to perform services for anyone else. Do I need to apply for a business license? Is there an advantage for applying for one?
Date: Fri, 03 Jan 2003
Thanks for writing.
Applying for a business license strengthens the argument that you are an independent contractor. If you are only providing services for one customer, your classification as an independent contractor is a weak one, likely to fail if challenged. Some tax considerations are whether you are subject to self-employment tax, whether deductions should be claimed for business expenses on Schedule C and the ability to have your own retirement plan.
For answers to more business questions and information about new tax developments, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight!
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