A Checklist for Starting a Scrapbooking Business

Starting a scrapbooking business entails many parts. Here we will discuss a few important ones, a checklist, if you will, to guide you on your path.

Choosing a Company Name

Starting a scrapbooking business is perhaps like recognizing a dream that was once an embryo tucked away to think about amidst your busy life. I am not literally a mother, but, for many years I had a recurring dream of expectation. For a long time, I carried that dream inside me, debating whether to give it birth or abort it for things more practical. Having never really given up on whatever it was meant to be, I soon realized that dream was growing into a reality.

So, starting a scrapbooking business was not my first idea. My first, similar in the fact it was a craft, but different in type, was crochet. I had named that business Joli File (pronounced ‘jolee feelay’). This is what I named my first child, so to speak. This one lasted two years before I closed in frustration. This I started in conjunction with someone else’s dream. I don’t consider it a total loss because it has helped me to make different and hopefully better decisions in regard to my second child, which is my website. Starting a scrapbooking business is my second dream child.

Here are some ideas for naming your own scrapbooking business:

• Make a list of names and survey your friends, family and colleagues for their opinion or suggestions, once letting them know you are starting a scrapbooking business.

• Make sure the name reflects your company’s goods and aesthetics. Make sure it is a name you will still like a decade later.

• Do a national (or international) search for other companies using the same name.

• You should also check the Internet for domain names that use your prospective company name. Keep it in mind, too, should you ever want to have it for a domain name for your business. If you see it is available, then reserve it.

• Should you go through the SBI! Platform, follow their directions on choosing a domain name.

Trademarks

Starting a scrapbooking business may inspire you to consider creating and filing its own trademark. Of course, your own business name can be its own trademark. It can be a business name, symbol or picture; a slogan or product name that distinguishes your company from others selling the same product with a different name. It protects you by preventing someone else from opening a company or selling a product with the same name. Your trademark is not legally yours until you make an official trademark request to the government. To file a trademark, you first do a trademark search, on your own or through a search firm, or with an attorney’s help.

If you trademark is available, you can register it on both state and federal levels. The process can take from a few months to over a year, but once finished; will make you the owner of this trademark for ten years.

Regarding the “poor man’s patent” and similar trademark types, this is considered a myth in that it will not protect your work in a court of law. While the “poor man’s patent, copyright, and so forth, does not help you, being aware of organizations that can help lessen the cost and give you your money’s worth is valuable. One such organization touted often by Bill Handel and others is Legal Zoom. They can walk you through every step of the process of your dream of starting a scrapbooking business.

Your Company’s Legal Structure

Considering your legal structure when starting a scrapbooking business is important. It will determine your personal liability and also the taxes you’ll have to pay. To know what the best option is for you and your company, the best advice is to consult a professional, like an attorney or an accountant specializing in small business. You can also always check the Internal Revenue Service website for more up to date information.

Structures that have limits on your liability in case of harm to a customer are

C Corporations – limited liability formed with the help of an attorney or an accountant. Paperwork must be filed stating the names of the corporation’s officers, directors and shareholders. C Corporations are subject to double taxation, meaning they pay taxes on their profits and then each shareholder pays his or her taxes on money taken from that profit.

An S Corporation has the benefit of limited liability without the double taxation issues of a C Corporation. It does require hiring an attorney or an accountant to file the paperwork for you.

A Limited Liability Company (LLC) is a favorite corporate structure for small business owners. It has limited liability and allows more shareholders than an S Corporation. You will need to file an operation agreement with a state agency. Most importantly, the LLC does not require an attorney or an accountant to file.

Most home-based businesses looking at starting a scrapbooking business are less likely to have to worry about or deal with risky situations, so, tend to go for unincorporated structures. The following are such structures:

Sole Proprietorship: Most creative’s, including those starting a scrapbooking business, will take on this structure. It doesn’t require formal documents to say you are a sole proprietor. It may say it on the application for business banking, but that is all. At tax time, your company’s profits and expenses are filed on a form called a schedule C, also known as a Profit and Loss Statement.

General Partnership: Is your business a group endeavor? You need a partnership agreement ironed out that gives each partner’s responsibilities and what percentage each partner owns of the company as you consider how you are starting a scrapbooking business. When filing taxes, your accountant will file a U.S. Return of Partnership Income.

Limited Partnership: this one is an in between of the limited liability of other structures and the unincorporated ones. This has two levels – general and limited. General partners are responsible for running the business and are liable for the debts and agreements made on behalf of the business. Limited partners are the financial backers who have no control over the business but who share in the profits and losses based on what they put into starting a scrapbooking business.

Application for a Business License

To legally run a business, you need to apply for a business license in your city. Usually there is a nominal fee and when you yearly renew; a business tax is required based on what you made if anything. The first time around, I had to make a guess at what I expected to make and that was what I paid at the start. As that scrapbooking business had not gotten off the ground, I don’t know what percentage I would have paid after the first year. As with everyone starting a scrapbooking business, the license must be secured on a wall for any to see at your place of business.

Zoning Regulations

Along with obtaining a business license, city officials will verify that you are able to run your scrapbooking business at your location. In most cases, cities will allow for you to run your scrapbooking craft business out of your home, as long as you don’t post advertisements and starting a scrapbooking business isn’t something that could potentially upset your neighbors. If zoning for your location doesn’t happen to allow for some aspect of your scrapbooking craft, for instance, holding crops in your home, you may need to apply for a special use or activity permit.

Applying for a Fictitious Business Name Statement (DBA)

If you are starting a scrapbooking business under a name other than your legal or personal name, you will need to file a Fictitious Business Name, also called a “DBA” or Doing Business As through your county clerk. You will need to run an ad in a local paper announcing you DBA and supply a copy of this ad to the county clerk. This is regular revenue for small newspapers. Besides your hometown paper, The Penny Saver is a good one to use.

Applying for a Seller’s Permit

If you will be selling taxable goods, you will have to apply for a resale license or seller’s permit as a part of starting a scrapbooking business through the agency responsible for these things. In California, that is the State Board of Equalization.

When you don’t want to pay retail for an item, you need to show your resale permit.

Applying for a Federal Tax ID

If you are a proprietorship, meaning just yourself, then your own social security number will do. If you use any of the other tax structures, you may need to file for a separate tax id, called usually an EIN. These other structures will be partnerships or corporations. Also, if employees are a part of your plan in starting a scrapbooking business, you will need an employee id number.

Home Liability Insurance

If you are running a home-based business, you should talk to your insurance agent to cover any tools, equipment, materials and inventory you have stored in your home. Optional riders may be available for adding to your policy in case a fire should happen in a space that is dedicated to your business, whether an extra room or the garage.

If you customers will be coming into your space, you may want to increase your personal liability insurance on the policy as well.

Opening a business phone line

Legally your home phone cannot be used for business purposes. You will need to use a business line. Many people use their cell phone for business calls, but, it is considered better to have a dedicated line so you will know how to answer these kinds of calls as apposed to casual calls that come in.

Opening a business checking account

Another legality matter is your checking account. You can’t use your personal account for business purposes. If, at least, you are making money regularly, you really should do this. My best advice till then is to take out the money you made via your business until you have made enough to open a business account and be able to keep up with bank charges as well as dealing with taxes.

If you open an account for your DBA, you will need to show proof that you’ve filed a fictitious business name statement with the county clerk. The ideal business account should offer:

• Flexibility in the number of checks written per month

• A reduced minimum balance requirement

• A minimal monthly fee

If you have a partner, you can set it up so that a check cannot be cashed without both yours and his signature. Open a savings account for setting aside money collected as sales tax, thereby reducing the temptation to spend it and then find yourself short when tax time is upon you. A popular financial software program to use is QuickBooks.

Get IRS Publications for Small Businesses

Starting a scrapbooking business entails responsibility for taxes on every level, be it federal, state, county, and city. Learn and understand the rules. How do they distinguish a scrapbooking hobby from a scrapbooking business, for instance? If you are starting a scrapbooking business, then yours is an entity where you are truly making a profit (as apposed to a few bucks here and there). A company needs to be profitable in three out of five years of operation or it is considered a hobby, in which case you will only be able to deduct expenses up to the total income. Read IRS publications or speak to a CPA to find out which types of expenses are deductible and how to file your taxes.

Get Health Insurance before you quit your day job

It will cost you a lot of your business profits, but, unfortunately, health insurance is a necessity when starting a scrapbooking business. Numerous health plans serve a number of budgets and needs. You can even consider joining a club or a guild to take advantage of health insurance group rates. Yes, I know. You probably think you are healthy as a horse. Take my word for it, but things happen when you least expect them. Don’t underestimate what your business can take out of you in health. Your health is integral to running your business, so take care of it.

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