Lesson 2: Type of Business
A registered small business
In a free, capitalist society individuals are allowed to do anything they want as long as it's not specifically illegal. As a result, you may buy and sell things as an individual as long as the things you're buying and selling are themselves not illegal. An individual buying and selling things under his own name from his own home is the simplest type of business structure. Just like the neighbour who is selling his car or the stamp collector who buys and sells for his collection, an individual buying and selling things under his own name from his own home may not need to do anything further in terms of legal structure.
There are a few things to watch out for:
1. Most jurisdictions put a limit on how much buying and selling you can do before you need some kind of registration or license. This is to allow private people and hobbyists to pursue their private buying and selling activities while requiring true businesses to register. Check with your local authorities.
2. Many jurisdictions have regulations regarding what kind of business activity is permitted in a residential area. The key factor is how much extra traffic, noise and other activity is generated. Running an office or selling services by mail or Internet is generally either allowed or at least can't be controlled. Running a business which requires frequent customer visits, deliveries or any kind of retail operation is usually not permitted.
3. If you don't register, you must conduct all business under your own name. This means your telephone, bank account, post office box etc. must all be under your own name and your customers' cheques must be made out to you. As soon as you use another, or a "business" name, almost all jurisdictions will require some kind of registration. This registration is just a record to show that you're the one responsible for any activities carried out under the other name. There are usually few formalities required.
Generally, while many people start up small or home businesses under their own name with a minimum of formalities, a properly established, professional-looking business should at least be registered with its own name, bank account, telephone number and postal address. You'll make a more professional impression if you ask for cheques to be made out to your business and have a separate bank account. It will also allow you to keep your business affairs separate from your personal affairs more easily.
Even if you register a business, that registered business with its own name, bank account etc. is still not a separate entity from you. Although your business has its own identity and although your own name may not appear anywhere, it is still considered to be you doing business under another name. That's the purpose of the registration - to keep a public record that you are the one doing business under that name and that you are the one responsible. That also means that the income of the business is your income as far as taxation is concerned and its expenses are your exoenses - an important factor as your business grows.
