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Author: gabeanderson Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: sole proprietorship & deductions Date: 4/25/2004 3:41 PM
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OK, so here's my situation: I have a sole proprietorship (in addition to my W2 job). I claim the income (1099 and otherwise) when I file taxes, and I also deduct expenses related to my business.

I had a DBA in San Francisco County, where I used to live. I recently moved from SF to upstate New York. My SF DBA is good through June, though probably doesn't apply now that I've moved away from the county.

My question is this: Is it really necessary to have a registered sole proprietorship (since the sole proprietorship and I share a tax ID # anyway) in my new county? That is, so long as I continue to report my income, can I still deduct my business expenses without updating my DBA? Or is it a good idea to register my DBA in my new county?

Thanks!

-Gabe
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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71638 of 121095
Subject: Re: sole proprietorship & deductions Date: 4/25/2004 3:45 PM
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Gabe: Your new county (or state) will require a D/B/A to be registered. I don't think you have to do this if you operate under your own name. But you may need a business license. Your other questions regard your income tax returns which don't care if you are registered as a D/B/A or not, just so they get the tax on all your personal income and know your TID# if it's different from your SS#. ed

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Author: Littlechap Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71740 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/5/2004 7:44 PM
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I had a DBA in San Francisco County, where I used to live. I recently moved from SF to upstate New York...

My question is this: Is it really necessary to have a registered sole proprietorship (since the sole proprietorship and I share a tax ID # anyway) in my new county? That is, so long as I continue to report my income, can I still deduct my business expenses without updating my DBA? Or is it a good idea to register my DBA in my new county?


Hi Gabe,

In my opinion, the only purpose and value for a sole proprietor to register a "fictitous name" (I assume that's what you mean by DBA) is for the sake of branding. Building a brand may, or may not, help you make more money. If you are a roofing contractor you could do just fine as "Gabe's Roofing" but if you wanted to boost sales, expand, or charge higher fees, you might get value from registering "LeakBusters" or some such thing. (Sorry, that's the best I could come up with in a hurry! <g>)

You get the point -- the brand is something that conveys a meaning above and beyond your own personal reputation. It is also something that can be sold if it is trademarked and so on. FWIW, most roofers I ever saw just used the family name <g>. Anyway it is my understanding that no DBA registration is required when you work under your own name, and especially if you use your own SS# as the business Tax ID#.

(I haven't checked those laws in a long time, so you might want to confirm them with your local authorities. They'll know better than we.)

The other aspect of a fictitious name is just what you identified -- geographic limits. I know somebody who used one for years but never registered it, then finally did on a local basis. It did not have any particular meaning to anybody but him, I don't think -- and there were a zillion other companies using that name all over the place, including the Internet. He's happy with it, but it may well function more like a sort of "vanity license plate" concept than a real business need.

So, if the DBA has any real meaning or value, I'd nail it down in every region where I expected to do business, and definitely include California and NY (or, LA and NYC, or whatever). I'd want to control the use of that name in all the places that mattered, because brand identity can be dissipated so easily. This also includes getting a web domain name that echoes the DBA, and that's getting harder and harder to do. Trademarking is a lot easier if you have established this identity as being associated more with you than with some other person or entity.

Your county government may have its own regulations, but I think most municipalities simply follow the lead of the IRS, so whatever specs or restrictions the IRS places on the name you use, you can probably do the same thing on a local basis.

There may well be more to it than this, but anyway I think this is the answer you need as it relates to Schedule C. The only other thing I'd look at is whether the change from one year to the next gets undue attention from the IRS and makes them think your filing status has changed in some way. Some of those examiners are really easily confused. <g>

Hope this helps.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71744 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/5/2004 9:30 PM
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Your county government may have its own regulations, but I think most municipalities simply follow the lead of the IRS, so whatever specs or restrictions the IRS places on the name you use, you can probably do the same thing on a local basis.

Sorry, but this is completely backwards. The IRS puts no limit on the name you use to conduct your business. If you are a sole proprietor without payroll, the IRS doesn't care other than that you list the name on Schedule C. If you have payroll, you need a separate tax ID for the business and that has to be issued in your DBA name (or your personal name if that's what you use).

On the other hand, the regulation of business registration is completely up to your state, and in some states, local government.

Ira

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Author: Littlechap Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71747 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/6/2004 2:56 AM
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"Your county government may have its own regulations, but I think most municipalities simply follow the lead of the IRS, so whatever specs or restrictions the IRS places on the name you use, you can probably do the same thing on a local basis."

Sorry, but this is completely backwards. The IRS puts no limit on the name you use to conduct your business.


My goodness, what is with the people on this board? So anxious to find something to disagree over. I suppose that's what comes from thinking about taxes all day long. I can relate to that, but still...

What the IRS cares about is that they can match up the entity identified on the Schedule C with the entity on the 1040. You can use other words if you don't like "specs or restrictions" but it is fair to say that the IRS is highly interested in having data on those forms reflect the real world as accurately as possible.

I really do not want to spend all night typing in scenarios whereby the use of a fictitious name could create confusion, but they exist. If one wanted for some reason to fill in the name section in such a way as to guarantee an audit, I'm sure they could do it. You're correct in suggesting that it's unlikely in Gabe's situation, but when I write such phrasing I do so consciously, to accommodate all possible cases.

If you have payroll, you need a separate tax ID for the business and that has to be issued in your DBA name (or your personal name if that's what you use).

Hm. Now, that is a "restriction," is it not? Goodness sakes. Didn't you just say that the IRS would not place any limits on names on a Sched C?

Gabe made no mention of payroll, which is why I did not bring it up. I assumed that if he had one, he'd be using his EID# instead of his SS# --which is what he said he was using.

On the other hand, the regulation of business registration is completely up to your state, and in some states, local government.

For sole proprietors, my city and state both accept the Federal Schedule C in lieu of their own forms. But again, my phrasing accommodated all possibilities. You are just repeating what I said.

But if you want to find something to disagree with, please, feel free.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71749 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/6/2004 7:54 AM
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"Your county government may have its own regulations, but I think most municipalities simply follow the lead of the IRS, so whatever specs or restrictions the IRS places on the name you use, you can probably do the same thing on a local basis."

Sorry, but this is completely backwards. The IRS puts no limit on the name you use to conduct your business.

My goodness, what is with the people on this board? So anxious to find something to disagree over. I suppose that's what comes from thinking about taxes all day long. I can relate to that, but still...

No, the issue is entirely about answering the question asked. Although this is a tax board, not all the questions are about taxes. This is one of those "off topic" questions. The issue of registering a DBA in a new state is entirely a legal question.

What the IRS cares about is that they can match up the entity identified on the Schedule C with the entity on the 1040. You can use other words if you don't like "specs or restrictions" but it is fair to say that the IRS is highly interested in having data on those forms reflect the real world as accurately as possible.

No, the IRS does not care at all what names you use as a DBA on Schedule C. The DBA is included only to help distinguish between multiple Schedule C's. The only entity (entities) the IRS cares about are the ones whose SSNs are on page 1.

If you have payroll, you need a separate tax ID for the business and that has to be issued in your DBA name (or your personal name if that's what you use).

Hm. Now, that is a "restriction," is it not? Goodness sakes. Didn't you just say that the IRS would not place any limits on names on a Sched C?


Actually, I made a mistake here. If you apply for an EIN, it is issued in your name (as the legal entity), not the DBAs. Again, you can have multiple sole proprietorships using the same EIN. If you don't believe me, read the instructions for Form SS-4. Even if what I wrote originally were correct, you continue to confuse cause and effect. You seem to be implying that the IRS has some control over the name you do business under. The choice of business name comes first. All the IRS wants is that the name you list on Schedule C match the one you've already chosen to do business under. If you decide to run a "get rich quick" scheme and call your business "The Motley Fool", the IRS won't care. The folks who run this board will certainly care. Your state/local government may also care. They may take action to prevent you from using the name, but their action won't be based on your entering "The Motley Fool" as a DBA on your tax return.

On the other hand, the regulation of business registration is completely up to your state, and in some states, local government.

For sole proprietors, my city and state both accept the Federal Schedule C in lieu of their own forms. But again, my phrasing accommodated all possibilities. You are just repeating what I said.


Please stop confusing taxes and law. The original question was "do I have to register my DBA in a new state?", not how will I complete my tax return. My answer (above) addressed the legal issue. I ignored the tax issue entirely.

Ira

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Author: Littlechap Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71754 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/6/2004 1:56 PM
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"the issue is entirely about answering the question asked.

Yep. But that's not what you're doing at all. Proof follows below. Meanwhile, Gabe could find many of his questions answered on the IRS website at http://www.irs.gov/businesses/small/article/0,,id=99065,00.html

If you had so much to say, why didn't you reply to the man directly? You sat around silently, then pounced on an innocent respondent with inexcusable hostility, inaccurate information, and a pretense of disagreement that does not even exist. What's wrong with you?

I said "What the IRS cares about is that they can match up the entity identified on the Schedule C with the entity on the 1040." This applies to Gabe's case, in which there's only one Schedule C to worry about. But you want to argue. So contrary to your claim that you are "answering the question asked" you go off-topic and answer a question he did NOT ask! And your reply is incomplete at best:

The DBA is included only to help distinguish between multiple Schedule C's.

The DBA is most likely present for other reasons I won't go into here. As for the distinction between one schedule C and another, it would be far less dependent on the name than on section A, which asks for the nature of the business, and Section B, that asks for the Business Code.

Read the IRS instructions for Schedule C, section A:

...If you owned more than one business, you must complete a separate Schedule C for each business. Give the general field or activity and the type of product or service...

and section B:

These codes for the Principal Business or Professional Activity classify sole proprietorships by the type of activity they are engaged in to facilitate the administration of the Internal Revenue Code.

Just changing the DBA from one Sched C to the next would not prove to the IRS that you were actually conducting multiple different types of business. These other lines would be far more useful. But none of this applies to Gabe, so as I said, you've taken the thread off-topic.

you can have multiple sole proprietorships using the same EIN. If you don't believe me, read the instructions for Form SS-4.

Good grief, you're arguing with yourself. This is really far afield and has nothing to do with anything anybody else said, including me.

You seem to be implying that the IRS has some control over the name you do business under. The choice of business name comes first.

There is not one word in anything I said that states causality or a temporal relationship between the person's choice of name and anything else. You must be living your own private Star Trek episode.

All the IRS wants is that the name you list on Schedule C match the one you've already chosen to do business under.

This is EXACTLY WHAT I SAID. Three messages back I said "The only other thing I'd look at is whether the change from one year to the next gets undue attention from the IRS"

This pointless argumentation gets worse. You go on about a hypothetical situation in which the guy uses "The Motley Fool" as a DBA, and how the Gardners would care more than the IRS. Again, this is EXACTLY WHAT I SAID.

"In my opinion, the only purpose and value for a sole proprietor to register a "fictitous name" (I assume that's what you mean by DBA) is for the sake of branding... I'd want to control the use of that name in all the places that mattered, because brand identity can be dissipated so easily... Trademarking is a lot easier if you have established this identity as being associated more with you than with some other person or entity."

Obviously, I already addressed the issue of intellectual property. All you are doing now is paraphrasing me, while claiming to disagree.

Please stop confusing taxes and law. The original question was "do I have to register my DBA in a new state?", not how will I complete my tax return. My answer (above) addressed the legal issue. I ignored the tax issue entirely.

Please stop confusing your obnoxious and confused argumentation with text that has any purpose being interjected into a polite conversation.

It was the original poster who confused the tax issues and the legal issues, but he did so innocently. I tried to helpfully address his questions in the way he asked them, rather than lecturing or talking down. You were nowhere to be found. You did not help the guy at all.

And in two messages, in almost every regard, you have supported, echoed, or paraphrased the very same things I said -- yet you think you're correcting me, and you say so in very condescending and demeaning terms.

I suggest that you review the Motley Fool Terms of Service regarding the civil tone and atmosphere that they prefer to maintain here.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71760 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/6/2004 9:17 PM
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I suggest that you review the Motley Fool Terms of Service regarding the civil tone and atmosphere that they prefer to maintain here.

If you think my tone hasn't been civil, you don't know what incivility is like. I'll hold my history here on the Fool up to anyone's without shame.

As far as I'm concerned this thread is closed.

Ira




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Author: Littlechap Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71761 of 121095
Subject: Re: sole proprietorship & deductions Date: 5/6/2004 11:27 PM
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As far as I'm concerned this thread is closed

No, the thread is still wide OPEN because there may well be people besides you who'd like to contribute. They might be less inclined to do so after seeing how negative the tone can get here, though.

I hope Gabe was able to get something useful from the tidbits of information that crept in. I found the article on the IRS website to be quite pertinent, but it's not part of any standard IRS form or schedule, so one would only find it by searching that site.

One can find further ideas and information on the use of DBAs and trademarks at:
http://www.bizadvisor.com/tm.htm -- general info about names, trademarks, and so on.
http://www2.nypl.org/smallbiz/business/struct/stprint.htm -- specific advice about fictitious names in the state of New York, which is where Gabe is moving; includes a bibliography and other links.

As for your pronouncement above: you can end your participation in any thread you want at anytime, but such a decision does not require a formal announcement, much less an attempt to quash further comments from others by declaring a topic "closed" -- as if your exit requires all others to cease talking. Goodness sakes. You are no more or less important than me or Gabe or any other person who wants to participate.

You may be proud of your "history" but you have made a pretty negative impression on me in a very short time, and I have a pretty good history on the Fool, too. Still, I assume that you must know a lot of stuff, and have no doubt done good for other folks. You simply did not seem to demonstrate those things this time around. So I'll just look forward to seeing them in some other instance along the way.

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