Self-employment is a route many individuals take to provide income for themselves and their families. The Bureau of Labor and Statistics reports that 15.3 million individuals were self-employed in 2009. This statistic includes both individuals who registered their self-employment as actual businesses and those who did not. Deciding whether to register self-employment business activities depends on where the person is located, the profession of the person and the services offered.
Benefits
A self-employed person who registers his business may be viewed by potential customers as more credible than a person who does not. A person who registers his business has to choose a legal business structure, such as a limited liability company. This offers the business extra protections that a sole proprietorship or unregistered business does not enjoy, such as limited liability of personal assets in the event of litigation. Registering the business also allows the owner to obtain business liability insurance, which also offers protection in the event of litigation.
State Regulations
The Small Business Administration states that whether a self-employed individual needs a license depends on the state. Some states, such as Washington, require all persons who conduct business to have a license. Other states require only certain professions such as attorneys, doctors and teachers to be licensed. To determine if your current state of residence requires a license for self-employed persons, contact the secretary of state's office. This information can also be found on most secretary of state office websites.
Local Regulations
Just as state regulations vary, local licensing laws differ as well. Contact the local county clerk's office, the city's business development department or the county commissioner's office to determine if a self-employed person needs to register the business locally.
Taxes
Because a self-employed person does not have a traditional employer who pays into social security and Medicare on the his behalf, a self-employed person has to file taxes as both an employee and an employer. If the self-employed person made more than $400, he has to fill out Schedule SE, and include all income that he made through self-employment. This is in addition to the regular filing of a 1040 tax return.
Considerations
If a self-employed individual does not register his business, but state or local regulations require registration, the individual can be fined and prohibited from conducting business until the business is registered. Since some cities have strict zoning laws concerning home-based businesses, it is a good idea for a self-employed person to check into the local zoning ordinances.