IF you are opening a small one man business with little visible impact then I suggest that you research the above yourself.
DO NOT go to city hall and ask. "What permits do I need to operate a blacksmith shop?".
If you do so then you are on their "radar" and you may be in trouble.
Do the research!
The information will not all be in the same place.
Some will be in the Public library, most in the Courthouse or Clerks Office. Some may even be on-line.
DO ASK if the codes you are looking at are current. Those in public libraries often are not. Zoning changes constantly.
I have found the people at most county clerks offices to be friendly but only to a limited extent.
They will point you in the general direction of what you are looking for but will NOT look for you. It is not their job.
Listen closely to what they say. It will be quick and there may be no second chances.
In the United States as a self employed artisan you will need to file a business tax form, Schedule C.
This is required to claim expenses against your business income.
If you have a profit you will be required to file a Schedule SE for self employment taxes.
Self employment taxes are the same thing as Social Security except that as a self employed person the rate is double because you have no employer matching your contribution.
As a business you can write off just about EVERYTHING as an expense.
Example, Donations to ANY organization whether tax exempt or not can be written off as advertising if the donation includes a credit line in a program or magazine.
This is not just charitable, it is advertising. The important thing is that you keep records of all your expenses.
As a manufacturer of custom goods you are not an inventory driven business like a grocery or department store.
Unless you have an enormous amount of raw material in stock or finished goods in stock it is best not to have an inventory.
Ask your accountant to be sure but most of the time the small amounts that blacksmiths have on hand are not considered inventory and inventory rules do not apply.
Currently unless you drive a heavy truck and have very high fuel and maintenance expenses the mileage flat rate is your best method of writing off transportation expenses.
Record your odometer reading at the beginning and end of the year.
Currently the IRS lets small businesses write off a significant chunk on machinery that many years ago you had to depreciate over 5 to 10 years.
You are best off to take the accelerated depreciation deduction and not have to keep a depreciation schedule for each machine.
Also note that when you convert from a hobby to a business you may be able to write off machinery you put into the business.
Small tools are just about anything that can be walked off with.
Wrenches, hammers, screw drivers, tongs, reference books. . all small tools.
Tools that may seem to be a sizable investment often rapidly depreciate as soon as you buy them.
What will that $200 electric grinder bring at the flea market tomorrow if it is stolen OR you must sell out? Very little.
It is a "small tool". Some tools like drill bits are about the same as a consumable. Small tools are written off as an expense the year that they are purchased.
Your utilities, fuel, materials (everything from steel to sandpaper and paint), libility insurance and advertising (including web-site expenses) are all expense items.
Read the rules for each item on the Schedule C carefully. Things change but most of the rules are fairly simple. Some things like meals on the road must be reduced by half.
If your business is at home you cannot write off the home (base) telephone but you may write off other phones, specific long distance or toll call on your home phone.
Due to the exclusivity rules you are best off not to declare an office in your home.
This is a red flag and may get you audited. However, expenses for shop space are not an office.
AND there is one place that the exclusivity rule does not apply, storage.
You can declare storage space as half business and half personal.
Don't do it unless the space is clearly defined and a significant expense.
If you do not do your own taxes be sure your accountant clearly understands your business.
Even if you have someone else do your taxes you will need to provide all the data, recipts and so on.
You need a business checking account and for the bank to return your physical checks and monthly balance sheets.
On-line reports are VERY helpful from your bank and credit card companies but you need that paper backup.
Employees add several layers of complexity to your business.
You should probably hire an accountant to do the paperwork and keep you out of trouble.
SO. . when you hire that first employee you have ANOTHER part time employee as an expense.
When you hire that first employee you need a Federal Employer Tax ID number, you will need (are required to have) unemployment and worker compensation insurance.
Employee taxes are paid to the IRS on a Quarterly, Monthly or AS ACRUED (daily) basis depending on the number of employees and amount of taxes.
DO NOT apply for a Federal Employer Tax ID number until you are ready to employ someone.
Once you have that number you are required to file quarterly reports.
Note that not paying withheld employee taxes can bring the both the State and Federal government crashing down on you.
Get caught doing this and they will seize property first and aks questions later.
Having employees is serious business, THINK about it.
PROFIT OR LOSS: The IRS can declare your business a hobby if you do not declare a profit 3 out of 5 years.
However, there ARE exceptions to this. It is common for new businesses not to make a profit for several years.
AND if you can prove you are legitimately in business, trying to make a profit and not just trying to offset income from another source.
The IRS has a list of exceptions but you may have your own explanation.
On paper you can make a business look good or bad by juggling the numbers.
The IRS says you MUST report all income but they do not require you to report all expenses.
In fact it is common for people to overlook expenses or lose recipts or proof of the expense.
If you do not want to show a loss then just leave off some expenses.
A profit, no matter how small is a profit and may keep you from having to explain that you took losses the fourth year in a row.
State Taxes vary greatly in form, substance and requirements.
However, most will require a copy of your Federal Schedule C and supporting documents.
States, and even you locality have access to your Federal tas returns so be sure to report the same income you did to the Federal government.
The Law and Blacksmithing:
What laws and regulations apply to my blacksmithing business?In the United States there are no specific laws or licensing requirements for being a blacksmith. However, your locality (city, state, county) MAY require:
IF you are opening a small one man business with little visible impact then I suggest that you research the above yourself. DO NOT go to city hall and ask. "What permits do I need to operate a blacksmith shop?". If you do so then you are on their "radar" and you may be in trouble. Do the research! The information will not all be in the same place. Some will be in the Public library, most in the Courthouse or Clerks Office. Some may even be on-line. DO ASK if the codes you are looking at are current. Those in public libraries often are not. Zoning changes constantly.
I have found the people at most county clerks offices to be friendly but only to a limited extent. They will point you in the general direction of what you are looking for but will NOT look for you. It is not their job. Listen closely to what they say. It will be quick and there may be no second chances.If you are a hobbyist then you should look into the zoning, noise and fire ordinances. You can probably operate within them if you know what is expected. Note that ANY complaint from a neighbor will be considered with more weight than your rights to do what is legal under the law. It is not right, but that is the reality of politics.
NEIGHBORS:BLACKSMITHING AS A HOBBY: THE ARTIST'S STUDIO BLACKSMITHING AND TAXES:
References and Links
2006 Jock Dempsey, www.anvilfire.com