General Question

Capt_Bloth's avatar

How do you legally charge for an independent contracting service when you don't have a business?

Asked by Capt_Bloth (2703points) March 6th, 2013

I was recently asked to do a small catering job (less than $700). The issue is that it is for an event at a university and they will only pay a catering company. I would like to help, but after spending a while googling the subject it seems that I need a proper facility approved by the Health Department and a business license. Does anyone know a way around this without having Uncle Sam take an interest in me?

Observing members: 0 Composing members: 0

9 Answers

Seek's avatar

Two problems:

1. Any income over $600 is reportable to the IRS.

2. The university wants a professional.

So, unless the university is willing to pay a nonprofessional caterer cash under the table, no.

Tropical_Willie's avatar

The kitchen could be a church or fraternal organization kitchen and they would charge you a day fee or use fee.
The license is a form you fill out in your municipality and pay a fee.
The $700 dollars is reportable as income.

Ron_C's avatar

I am a consultant, that’s what you call an engineer that has no permanent place to work. My first job is next week. I’m going to print up some service reports and probably some billing forms. I might need an industrial insurance policy to work in some places.

I don’t mind paying taxes. Your customer may send you a 1099 form it they are writing off your service on their income tax.

Remember, you are a service provider so if someone gets food poisoning from something you served you’ll be libel for damages.

Adirondackwannabe's avatar

It’s up to you to deal with the health department, and I’ve never heard of a business license. You give the University a W-9 with your social security number and they give you a 1099. You file a schedule C or C-EZ with your taxes and show the money as self employment income and deduct the expenses you incurred.

snowberry's avatar

The last time I checked, as a contractor, I had to give 30% of my income to Uncle Sam. Then I got to deduct business expenses (tools, mileage etc.) from that tax. It may have gone up since then. That was a few years ago.

What’s irritating is that it didn’t pay to walk down the street to my neighbor’s to do a job. No, I had to drive several miles, or I didn’t get to deduct mileage, which really adds up.

CWOTUS's avatar

If this is something that you would like to pursue as a business, then you should do it the right way. That is, make arrangements to use a commercial / approved kitchen and food prep area, and get the business license. This will probably involve (depending on what state you live in) obtaining a tax certificate and taxpayer ID (as the business), which will also enable you to claim sales tax exemptions on goods you purchase for resale.

You should definitely plan to pay income tax on the profits you generate, and try to do it without too much complaint. After all, the tax you pay will be based on the increasing profits you expect to make (will be making).

If you’re undecided about whether you’d like to continue in the business, then perhaps you could steer the business to another established caterer who’s willing to do a job this small, and see if you could participate as either some kind of partner or even hired help for the event.

marinelife's avatar

1. They will have to issue a 1099 reporting the contract income.

2. You can rent a certified kitchen.

Jaxk's avatar

It is unlikely that any large entity, corporate or state, would allow you to prepare food without a business license and insurance. Otherwise they accept the liability. There are numerous health certificates required for food preparation depending on the state you live/work in. This will cost a few hundred dollars assuming you can find a kitchen that meets code. Getting started is not cheap and building a kitchen that meets all the requirements will break you.

Silence04's avatar

By taking an independent contract you, by default, become a sole proprietorship. So I that sense, you are a company. No gov’t forms or fees are needed for that, you just have to report your yearly earnings on a 1099 tax form.

If you want to sound more professional by having a company name, for a small fee you can file for a fictitious name/DBA (doing business as). Doing this links your company name to your taxID number (aka Social security number as a sole proprietorship). And it will allow you to cash checks written to your business name.

The problems you might face in this scenario are if there are any laws or requirements for offering a catering service. If there are I’d imagine there is a threshold/limit of food you can make per year before having to qualify for any regulations.

Another issue you may have is prosoective customers might have policies in place to only use catering services from people with proper state food regulated kitchen. While people are capable of having their own home kitchen legally approved, it will have to be treated/cleaned like any other commercial kitchen and face random inspections.

Answer this question




to answer.

This question is in the General Section. Responses must be helpful and on-topic.

Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
Knowledge Networking @ Fluther