Death, Taxes and the CPSIA

Once I decided I was running an actual business* the next logical step was to get all legal. It’s amazing how doing this will change your perception of what you’re doing. Paying for a business license and trade name makes you really think you’re legit. Part of that may be that navigating the bureaucracy of getting those items is akin to going down the Amazon river in an innertube. It’s frustrating as hell. Not to mention time consuming, confusing and expensive. But it doesn’t have to be. (Except the expensive part. That’s pretty much a given.)

He wants your money.

I see more questions on my Etsy team discussion boards about getting your business license and taxes than almost anything else. I had no clue where to start, and like most people (I imagine) I started researching taxes at the state level. Save yourself a lot of time and don’t do that. Start at the smallest level and work your way up. Most of the time you’ll find that when you meet the requirements for your city or county, you’ll have met them for the state and feds as well. The only exception to this is the Federal Tax ID number, which you’ll need if you want to get wholesale pricing from some sellers.

In my case, I started with the county since my place of business (my house) is unincorporated. If I were within city limits, I would have started with City Hall. So I’ll use the county example, and you can adjust for your own situation. Start by Googling “business license” and your county. That should at least get you a site telling you where to go. If you’re lucky, the forms you need will be online. It’ll also tell you how much it is and whether you’ll need to submit it in person or if you can mail it in. (Gwinnett County, GA information is here.) You will have to renew this license every year, and mine runs on a calendar year so it pays to do it as close to January 1st as possible. They don’t prorate. In Gwinnett County, GA it’ll cost you $80.

Next, you’ll need to register your trade name or DBA (doing business as). If you sell under any name other than your own, you need to do this. It’s expensive, but you never have to renew it. Google “trade name registration” and your county to find the details. Pay attention to how they want to be paid. In my county, they want two different payments. One money order for the courts, and a check for the local paper to publish your name. I can mail mine in, and the form is online so that makes it a bit easier. (Gwinnett DBA form PDF.) Here the trade name will cost you $161 and publishing it (which is required) is another $40.

That should take care of your licensing, but be sure to ask when you’re at the business license office if you need anything else. I found them very helpful and knowledgeable. That brings us to…

DUM DUM DUM

Taxes.

You’ll want to do this part, because you can file a Schedule C with your taxes and any business loss you have will be deductible. Of course, you’ll be paying if you make a profit and you’ll also need to make sure you pay appropriate taxes on what you sell. As complicated as most people seem to think this is, in reality it’s super easy.

Yay!

In Georgia I have to charge tax and keep records on sales made within the state. So anytime a customer from Georgia buys a Ruggle, I have to collect tax and pay that to the state. My county taxes are paid in that same lump, so I only have to file with and pay the state. (The business license is also considered a tax.)

For Georgia, everything can be done online, which is awesome. You will need to know how much the taxes in your area are. For me it’s 6%. This is Georgia’s tax website. Once you get signed up, I suggest you appeal to have a more reasonable schedule for reporting. Georgia’s default is monthly, but I’ve only made one sale in Georgia and it was annoying to remember to go tell them I hadn’t sold anything every month. I just filled out a simple form on the site and it got approved fairly quickly. Now I report yearly, but you can also choose quarterly if you do more local business. Once you sign up with the state, that should cover you locally, but it’s not a bad idea to ask while you’re at the courthouse getting your business license.

You don’t need a Federal Tax ID (or Employer Identification Number – EIN) unless you plan to buy wholesale from someone who requires it, or you need it to get into special retailer events and whatnot. They’re super easy to get though. Just go here and follow the instructions.

As you can see, people are pretty passionate about this issue.

Which brings me to the CPSIA. Otherwise known as the bane of children’s products crafters everywhere. If you don’t make items for kids consider yourself lucky. Very lucky. The CPSIA (or The Consumer Product Safety Improvement Act of 2008) was passed after all those toys from China ended up being lead filled. It’s huge, encompasses a lot of crap and is necessary reading if you make child oriented things or plan to anytime in the future. I actually know a couple of sellers who decided to stop making things for kids altogether because of this law. Which is a damn shame.

HootNAndy stopped making awesome things like this Skelepony rocking horse as a direct result of the CPSIA.

Cool Mom Picks has a great list of things to do to fight for handmade children’s items sellers. Some things are exempt, like fabric, which makes it much easier for me. Even fabric items like my Ruggles have to comply with labeling laws.

Here’s a couple of cliff notes versions of the CPSIA to get you started:
http://crochet.about.com/library/blstuffedtoyregs.htm
http://crochet.about.com/library/weekly/aa041500.htm

You’ll need to add some way to track your material lots. It would be impossible to track lot numbers from every bolt of fabric I’ve cut. Instead, I add a date to my label which serves as my “date of manufacture”.  This way, if there ever is a recall on fabric I can track it down via receipts.

The textile labeling laws are actually under the FTC (more long, boring reading). The short version is on the second link above. Here’s what my tag currently says:

Made from natural and synthetic fibers & materials.
delicate wash, dry on low
Hog Mountain, GA
USA

So you can see I had to be very general since I use all sorts of fabrics for the claws. The space after the washing instructions is where I write in the date of manufacture before putting the tag onto the Ruggle.

There’s also an entire forum on Etsy dedicated to CPSIA regulations. Here’s the one I found most helpful when I was researching what I needed to do.

As much information as I’ve put in this post, you should be able to see that it’s fairly easy to get all legal and legit. Aside from the CPSIA which can be a huge pain in the ass. If you have any questions, feel free to ask. As always I’m no expert, but I’ll do my best.

You thought I’d forgotten Death, didn’t you? Of course not! What you probably should do is amend your will to give any and all assets from your business to a beneficiary. I admit to not having a will (eep! I know). So I made a file folder for my husband which lists all the passwords, usernames and any other pertinent info he would need if I kicked it. If you’re awesome like me, you’ll include some names and contact info for people who might be interested in any supplies you have.

That’s it for this post. Curious about another aspect of running a micro business? Leave me a comment. 🙂 I love comments.

*honestly, I’m still waffling. Probably because I don’t have the time to really focus on it and make it take off. I won’t until the boys are both in school, so until then I’m just trying to keep it going. So it’s really somewhere between business and hobby at the moment.

Changes…

Since there’s a man painting the window on the other side of my sewing machine, and if I worked I’d be about a foot from his crotch I’ve decided to write a blog post instead.

The first thing any crafter struggles with is what to make and I’m no different. I can walk into a craft store and spend hours, coming up with a thousand different projects that would be really cool. I’ve done it, and have the materials of hundreds of cool projects lying fallow in my supplies to prove it. (Plus another couple hundred pages of magazines with inspiration or things I want to make on top of that, and let’s not even talk about my Pinterest account.) Starting a crafting business was like that for me. I had a lot of ideas and little direction. Now, when I look at business sites and they talk about formulating a business plan and 5 year goals and whatnot I just have to laugh. I don’t know a single handmade business owner who did it that way. We all just started making stuff, thought “hey, somebody might buy this” and opened shop.

Aren't these blown egg geodes cool?

Which is a good a way to do it as any I guess. Especially when you’re working on this kind of scale. If we were talking about a big corporation, or hell even a small brick and mortar business, that would be different. But when you’re talking about a business whose greatest investment capital is probably already sitting in the craft room then it’s a different story. I didn’t have to go to a bank and take out a loan to get started, I just made stuff with what I already had. Even though it’s not a bad way to do it, I would have done it differently had I gone into this thinking “business” instead of “make a little money, might be fun!”

For one thing, I would have nailed down my product to begin with. That would have saved me a little money on supplies that never got used (in the case of the pet items idea) and a lot of time and effort (in the case of the diaper idea). Arriving at my one true thing wasn’t a long process, but it was long enough. I think that’s one of the beauties of the micro scale handmade business. You can fail without going bankrupt. You can try new things without a great deal of expense. Research and development is natural and fluid. Feedback is pretty instant. Change is a good thing, and doesn’t feel like such a huge risk. Because it isn’t.

Of course there have been changes to my shop even after I settled on Ruggles. I’m constantly trying to improve my items and my customer’s shopping experience. Being online, I have to keep updating my product and my shop to stay viable and current.

Some of the changes I’ve made have been to make my Ruggles bigger. Create a permanent pattern base that I can work from so they are all consistent in size. Went from using Velboa furs to Minky. I switched from using safety eyes to embroidered eyes. Made my tags double sided and filled the back with everything I need to be CPSIA compliant. I’ve changed my picture background (several times), orientation and size. I streamlined my item description and moved a lot of useful but not critical information from there to the policies section. I created a stand alone website. I’ve tried and discarded a dozen different marketing ideas (I’ll save the specifics on that for another post).

I still like this background, but it didn't do anything to showcase my Ruggles.

And that doesn’t even begin to touch all the changes I’ve made in suppliers, supplies, logo design, tags, and on and on. To sum up: change is good. When you’re running something this small $10 spent on new business cards can make it feel like a whole new business. So you can change quickly and respond to customer input, competition and innovation.

It only took me about 7 hours to write this post! I’ll have to talk about the unbalanced balancing act of Mom, wife, housekeeper and business owner. Later.

Oh Hai Thar!

So I was laying in bed with my 13 month old as he fell asleep pondering (as one does) and it hit me. Well, not literally of course. Actually, my internal dialogue went something like this: “Dentist appointment tomorrow means I should probably shower tonight or in the morning. I should really journal about the business and how I’m struggling with various things. Hey, I have that totally neglected blog for Bewhiskered. HEY I KNOW. I’ll write about all the things I’m going through as a newbie business owner. That might be fun.”

So there ya go. I guess I should start at the beginning so if that sort of recap thing bores you to tears you can skip to the end now.

I worked for 10 years as a marketing professional. Then I got pregnant. I’d always wanted to be a stay at home Mom. But I also love making things. And writing. But it was pretty obvious early on that writing was going to be more difficult for me than making things. I just couldn’t get the time and space I needed to get into another world in my head which is what I need to do in order to write. Making things it was!

And boy, did I make things. They started to pile up. So I figured I could open an Etsy store and make a little extra spending money. The initial concept behind Bewhiskered was to make things for pets. It just never clicked. I have a ton of books on making pet toys and even some materials for things like catfish shaped kitty beds, but nothing ever got made. Then I finished my son’s cloth diaper stash and had a ton of material left over, so I made some extra cloth diapers and opened shop. That didn’t click either. I sold a few, but I wasn’t really into making them and the competition was fierce.

They were pretty cute though.

Third time’s the charm, right? I had this tiger rug my Mom latch hooked for me as a baby. With Jake’s six month pictures getting close, I decided I wanted to recreate that rug. I looked for a latch hook kit, and no dice. So I picked up this great book of stuffed animal patterns, enlarged the pattern for a tiger’s head about 300% and whipped up a vaguely tiger skin shaped body for it.

It was terrible. But it looks okay in his pictures.

You'll notice the photographer wisely cropped out the head.

Other Mom friends of mine were talking up these tag blankets so I looked up a few on Etsy. I didn’t like them. They were all small, for one thing. And boring. Cue the lightbulb. I chopped the head off that first tiger rug and used the body material to make the first Ruggle. It belongs to Jake. It’s pretty bad. Thankfully they got better.

So anyway, all of that is to say the process that formed this business was a slow one. It’s actually only been very recently that I started calling it a business. Before I’d say that I sold things online or I made these blankets or some variation of the sort. It was more a hobby. An outlet for my creativity and a way to make a little extra money that was flexible enough to fit into my Mommy life.

The first decision I faced was whether to keep it more of a hobby, or transition to a proper business. I was making only enough money to pay for more supplies really, but I got a big order that let me buy annual passes to the Georgia Aquarium. That was actually really cool. That had me thinking that Bewhiskered could fund other cool things for me and my boys. So now it’s a business. Which means it has to be profitable. And I have to keep good records to ensure that it’s profitable. And there’s all these licenses and taxes and stuff that have to be dealt with.

My record keeping is a dollar spot plastic accordion folder from Target with the sections marked by quarter. I put any receipts for things I don’t buy with my Paypal card in there. I use Outright.com to keep track of everything else, and manually enter the non-Paypal receipts about twice a year. I have an Excel spreadsheet for figuring out my product cost. I made it up so I’m pretty sure it’s lacking in a hundred different ways, but it works. I use free templates for just about everything and make up the rest myself.

I’m hoping 2012 will be the year I turn an actual profit. I’m going to end this post here, since it’s late and my kids still haven’t adjusted to daylight savings time which means I’ll be up at the ass crack of dawn.

I’ve got loads of topics for future posts, and I’m going to do my damndest to put them up on a regular basis. What do you want to know? I’ll be happy to answer with the perspective of a newly minted (bumbling through it) business person.

Farm Pictures

Some of you already know that my Dad owns a Santa Gertrudis cattle ranch in Alabama. It has been in my family for four generations and is my favorite place on this earth. I spent this past weekend there with the boys and wanted to share a few pictures.

2011 Wrap Up

So with my taxes all done and whisking their way through the ethers to state and federal government, I can wrap up the year for Bewhiskered. For 2011 I decided to donate 10% of my profits (or $25 if I didn’t make a profit) to Pit Bull Rescue Central (www.pbrc.net). They’ll be getting their $25 in the morning. 🙂

For 2012 I’ve decided to donate to Shelter Angels Pit Bull Rescue. They’re an Atlanta organization working to rescue Pits from Dekalb County Animal Control. I’ve also decided that throughout the year I’ll add a few Ruggles whose proceeds will go directly to Shelter Angels. So they will get 10% of overall profits for the year, plus 100% of these special Ruggles.

I hope you’ll join me in supporting this wonderful organization!

Erik’s First Birthday

I can’t believe it’s been a year since my little chunk was born. We celebrated his birthday yesterday, Viking style.

I think everyone had a good time. 🙂 It was a smaller crowd than our usual parties since I only know 4 families with kids in Erik’s age range and two of them declined. All told there were 6 kids and 6 adults. I found it much more manageable than our usual guest list so I might cut back on who I invite for the others. LOL

I made Viking helmets, of course.

Each child also got a plush dragon (I asked for colors ahead of time so there was no “but I wanted the RED ONE” angst to deal with). I heavily modified a pattern I found online, and it was really my first time making up a plush pattern as I went along. I think they turned out pretty good.

I made a small Viking ship out of half a milk carton, a straw and some paper. I filled it with Swedish fish and gummy sharks.

I made a big Viking ship out of a cardboard box and filled it with Erik and his guests. Hee.

The cake was just a white cake with red food coloring swirled in (Jake decorated the top with mounds of sprinkles). I had planned to make a dragon shaped cake, but got a migraine the night before which put a halt to that plan. In any case, it was enjoyed.

It was a lot of fun, and I wasn’t up until 4am making anything which is always good. 🙂 Now I get back to working on taxes, which haven’t been too bad this year. I’ll give an update later this week on Bewhiskered’s charitable contribution and announce the charity for 2012.

Holiday Happenings

As my Black Friday through Cyber Monday promotion this year I’ll be offering free shipping. The shipping charges will automatically disappear whenever I come out of the turkey coma on Thursday, and end when I wake up Tuesday morning.

Also, I have one (just 1!) custom slot left for the holiday season. If you want a Ruggle for a holiday gift, contact me now.

 

Erik has been a real trooper “modeling” my Ruggles for me, but he’s beginning to be a bit of a diva. Crawling all over, being late to the shoot, insisting on fresh apple juice… I might be looking for a new model soon.

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