Under the Table

Janet answers a question on doing business “under the table.”

Dear Janet,

Ever since I had a paper route when I was 13 years old, I’ve been interested in starting a business, but I’ve never been able to go ahead with any of the ideas. The main reason is because I’ve been working a regular job and have never had the time. I’ve watched other people do the things that I’ve thought of and be successful. Now I have another idea and I would like to act upon it. It should be able to earn about $50,000 profit annually, however it will take time to build up a customer base. I was hoping I could get a 2nd shift job and start up the business part-time in the morning. I would like to go “under the table” at first until I’m able to build up a customer base. However, if I’m not “legitimate” I don’t know if I would be able to get business’s business or wholesale prices on the items I need to run the business. Please help.

–Wondering in Womelsdorf

Dear Wondering,

I’m not sure why you want to work “under the table,” but I can assure you it’s not a wise thing to do. 

First, as you have indicated, you won’t be able to buy at wholesale unless you make your business “legitimate.” You also won’t be able to cash checks made out to the business name or get a merchant card account to allow you to accept charge card payment unless play by the rules. 

If those drawbacks aren’t enough to make you legitimize your business, consider this: willfully failing to report income is fraud. If you get caught (and it only takes one angry customer or neighbor to get you turned in), the IRS will charge you back taxes, penalties and interest and could even put you in jail. 

So, do yourself a favor. Start the business the right way. You’ll need to register your business and get a fictitious name certificate (also called a dba, which is an abbreviation for “doing business as.” And, you’ll need to get a state sales tax permit. The dba usually costs under $50. (There may be other costs associated with it though, like publishing your intent to do business in a specific local publication. You might also need a separate business license. ) There usually is no fee for obtaining the state sales tax permit. 

Good luck!

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