I mean, yes you need to report revenues, but... do you need a company for that? Do e.g. all Finnish photographers on Shutterstock have a company, in order to receive payments?
Yes, if you sell things (or electronic things), in any meaningful amount (no one will care for 200$ per year though), you have to set up a company or a sole proprietorship. It is like this in most western countries. The activity that you are doing in that case is called business, and of course you need to have a company or a similar business structure (like sole proprietorship) to do business.
Whether all people do it or not is another question, but that is what is required by the law.
I think the confusion in this thread is that (in most of Western Europe) you automatically become a business (or even company) by the sole act of doing "business" (enterprise with the purpose of earning money), and once you cross some (small) threshold you have to register in some capacity. That can be a ~$20 bureaucratic act, compared to the ~$500 act of setting up a proper company. But of course at that point it varies wildly by country.
IANAL, but I have done this a few times. I'm pretty sure you do not need a company to make money as a self-employed person in the USA. Not in terms of federal taxes anyway.
What you might need a company for is to pay sales taxes you charge for physical goods, or get insurance appropriate for your line of work. That's likely to be state-by-state. You just get the convenience of an EIN by registering and some additional legal protections by being a distinct entity (i.e. I could sell the company or assign IP to it or hire employees).
I have certainly gotten contractor income to me personally that I just had to account for. In the USA for small businesses you'd have to send the same documentation, so it doesn't even save paperwork. As a sole proprietorship I get the same tax documents from my clients as I would if I were operating directly under my name.
Edit: Also, if this were true in the USA, it implies that all those Uber drivers each have a sole-proprietorship set up. I'm pretty sure that companies can hire contractors as individuals without them becoming businesses.
You also need a company so you don't lose your house and life's savings if you're sued, too. That's what freelancers primarily create companies for. IRS doesn't really let you take advantage of any tax loopholes unless you employ a bunch of other people.
The topic is obviously enormous and more complicated than "big business bad", but it wouldn't be a loophole if it wasn't legal. Defining only illegal things as loopholes is not a great line in the sand, it's kind of a tautology that loopholes aren't illegal. I would expect that the specific definition varies a lot by person because democracy. One person's corrupt loophole is another person's tax incentive, but either way the loophole is legal.
What specifically the parent was referring to I'm not sure, but that would be why it is consistent to describe a company as both "in compliance with tax law" and also as "using loopholes". If they weren't in compliance with tax law they'd just be breaking the law. No one is accusing the companies of breaking the law, they're accusing the tax system of being biased and corrupt.
In the US, you're already a sole proprietorship without any registration. Of course, if you're actually doing business, you probably want the protections of an LLC, which requires registration and fees. But you can accept uncompensated gifts as an individual, and you can accept business income as a sole proprietor, all without registering for anything in particular. You are, as always, required to file accurate taxes, including estimated withholding.
Number of employees or members isn’t relevant. Types of behavior performed is. It is worth talking to a lawyer about this if you have enough revenue this matters.
You can take donations but AFAIK business licenses are required in every state in the US whether you provide product, service or something online. If you take donations then by law you have to declare that as income.
There is no generally “business license” in Arkansas. Some municipalities require them (but have very limited means of enforcing that requirement), and some specific occupations require licensure, but unless you fall under one of those narrow categories you only have to file taxes.
I've always found it deliciously ironic that the Articles of Confederation and the Constitution both dealt with interstate commerce and set up the federal government as superseding the states in this regard... but then corporations are a state level entity not federal, complete with 50 states worth of regulations.
No it isn't... In Canada, you can happily accept money from people and just stick it in the "other income" box on your tax return, where it'll get income-taxed appropriately.
If you're trying to do business deductions or want to pay business taxes instead, yes you need a business. If you're trying to set up a physical location, yes you need a business license from your city. But if you don't care about the pennies and your work is digital there's absolutely no requirement.
Generally speaking the same is true of “gifts”, though. You don’t have to report a gift as income if it’s reasonable, but drawing that line is where things get... complicated. Then you have to call in specialists like tax lawyers, etc.
Are you sure that you’re not operating as a sole proprietor under that set of facts? If I sell something with the intention of making a profit using my own name as the seller, bam, I’m a sole proprietor. If I file a doing-business-as (DBA) form with my city, I can sell under another name and still be a sole proprietor.
This is not the case in the USA. There is no general federal legal requirement to register a business or obtain a business license in order to sell things. However, there are specific industries for which business licenses are required (at any of the federal, state and local levels) and forming an LLC might help personal assets if you are sued.
It's different here - for revenue from intellectual property rights in particular you do not need to be a business (you do need accounting & to submit an annual declaration to the revenue service; but you can do that as a regular person, there's no need to register a business).
Untrue, you can work with a freelancer tax card. You can't bill with VAT and deduct that from your costs as an entrepreneur if you do so, but you don't need to register anything in order to work as a freelancer.
In Australia you don’t need to set anything up. If annual turnover is over $75,000 you’ll need to register for GST which requires an ABN, and if you want a .com.au domain name you’ll need an ABN, and other entities you deal with may want you to have an ABN, but for the sorts of things in question here you won’t need an ABN.
In the US, AFAICT "sole proprietorship" is just the label for a natural person doing business; the extent of the registration can just be DBA ("doing business as") so that you can cash checks in a name other than you own.
