This lesson focuses on the accounting procedure for franchise fees and the formula used for revenue taxes What is interesting is that in some states, one affects the other. To fully grasp this accounting nuance, I’ll first explain the franchise fee.
A business license is a document issued by your local Commissioner of the Revenue allowing you to operate within the boundaries of that community. It triggers the revenue and personal property taxes associated with your small business operation. Some states issue business licenses through the Secretary of the State via a franchise tax.
Many people turn their hobbies into a business operation. Not so much to make a living or make big profits, but more to help offset the costs of the hobby. Whenever you go to one of those community fairs, the vendors at the respective booths are mostly folks selling a product that is direct outcome of their hobby. The bands that play on stage, they make some money, but never enough to offset the cost of instruments, gear and transportation. But they enjoy entertaining folks and they hope someday they’ll get discovered.
The Internal Revenue Service promulgates rules and regulations concerning the employment status of workers. In general, workers are classed as W-2 employees and certain tests must be met to have the worker classed as a 1099 subcontractor. All 1099 subcontractors should be issued a Form 1099 in January of each year for the prior calendar year of services. This article describes the general tests that must be met for the worker to be considered a 1099 subcontractor.