When it comes to making crafts and then selling them, there are still a number of legal matters that you are going to have to consider – even if you simply sell your crafts at the flea market once a week as a way to get a little extra money on the side. These legal matters are going to grow slightly more complicated if you decide to begin selling your crafts on a regular basis. You'll need to worry about things such as permits, taxes and even insurance.
Selling your crafts at a garage sale
Check with your local government about any rules or regulations concerning selling your crafts at a garage sale. Most of the time, you'll be required to pay a small fee for a permit. In some jurisdictions, the permis is free but you're only allowed a limited number of permits a year.
Selling your crafts at a fair, flea market or craft show
More often than not, selling any crafts at a fair, crafts show or flea market is going to require some paperwork. First of all, you'll need to have an EIN (an Employer Identification Number). Once you have an EIN, you won't have to worry about any other registrations from the Federal government. However, you will most likely have to register with the state that you are planning on selling your crafts in. You can find registration information on the state’s business or tax portal. Many states provide online forms that you can fill out, making it a much easier process. Some states will also require you to apply for a state sales tax permit so that you can collect sales tax. As far as sales tax goes, it depends on the state you are selling your crafts in. Some states won’t require you to collect sales tax if you qualify for certain exemptions.
Setting up a small business to sell your crafts
If you begin selling your crafts on a more regular basis, you'll want to set up an official business for tax purposes. There are four basic types of business structures that you can choose from. If you are the sole owner of your craft business, then you may want to consider sole proprietorship. This is the most affordable option and is the easiest to set up. With a sole proprietorship, you won't be required to register with the state and it is not considered a legal entity. However, you will be required to register a business name if you are selling your crafts under name other than your own. Sole proprietorship is basically just an extension of you for the purposes of filing your taxes. You won’t be afforded any type of liability protection with a sole proprietorship.
If you're working with someone to create your crafts, you may want to consider a partnership. A partnership is where you agree to share in the work and financial obligations of the business. Partnerships are less common today than they were because it has become easier to set up a corporation or LLC.
An LLC (Limited Liability Company) is a separate legal entity that can provide personal protection against any of your business’s debts as well as liabilities. While not as easy to set up as a sole proprietorship, an LLC can be a great choice for crafters who want some protection of their personal finances without the complexity of a corporation.
What kind of insurance will you need?
If you sell your crafts from a store, then you’ll need business liability insurance. Don’t think that selling out of your home means that you will be covered by homeowner’s insurance. You’ll need to purchase extra in-home business insurance coverage if you do so. If you are selling your crafts at a fair, flea market or craft show, then usually you’ll be provided with a blanket policy that is often built into the fee for renting your booth. If you use your vehicle extensively for the purpose of selling your crafts, then you should consider coverage for a business vehicle as well.
If you decide to sell your crafts in any capacity, then you’ll want to keep these legal matters in mind.