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John Ask’s:

I appreciate all you’re doing for us up and comers here at dobizo.com. I’ve learned so much in the past few weeks! I was wondering if you can answer this question for me. I’m going to be starting a clothing brand soon and will be working alone and plan on mostly selling online and on occasions selling at trade shows, etc. What type of business entity do you think I should form? Also, I’ve heard that after I file my business name, a tax id is given to me by the IRS. Does this mean that I have to automatically start paying taxes? I’d really rather not pay taxes right away until I get my sales rolling. Anyway, thanks again for the website with its wealth of information and I hope to hear your reply soon.

- John

As far as what kind of business entity you should file would be totally up to you and weighing the benefits of the different setups. Benefits can vary from taxes to if you ever had to file for bankruptcy and you want to protect your personal assets. Please refer to Incorporation A Legal Entity Protect Your Assets and Legal Aspects of A Clothing Line (You have to join the network for the second article it is in the forum)

Not wanting to pay sales tax is a sensitive subject, because most small business don’t register their business name until they can see it is something their going to stick with or a viable business, but you will have to pay taxes and depending on your business setup you will pay a percentage of your sales. So if your not selling a lot of clothing then your taxes will reflect it…believe me.

When I first filed my business name and received a tax id I filled out a form that asked for your expected sales for the first year and you pay your fee according to what you estimate. If you end up selling more than you estimated you will pay the remainder the next year…if less you should receive an adjustment. I set my business up as a sole proprietorship meaning I was liable for my business and repayment of any debts owed and even my assets could be seized.

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