The music store where my husband teaches is closing. He will rent office space to continue teaching and will now be paid directly by students. He is also a performer, and we have a business license for that portion of the business.
1. Do we need a new business license for the teaching business? Or can we modify the current business license to include instruction as well as performing?
2. Renting office space is new. If we can modify the business license, does this include a change of address on my license ? Our home address is currently used, but teaching lessons will not be done in/from the home.
3. Forming an LLC vs. sole proprietorship: Since the lessons studio is open to the public, is this wise to protect our personal assets? We are 'sole owners' currently - how does this work?
I agree with Mr. Kelly's discussion as to your question (3).
(By "business license," I am assuming you are referencing a Business Tax Certificate, and my answer reflects such an assumption.)
(1) In the city of San Diego, whenever any person is engaged in two or more business activities at the same location, under a single business name, then such person is not be required to pay a separate business tax for each type of activity. So, in the case of providing both instruction and performances, as long as they both occur at the same location and under the same business name, it does not appear that you would need to obtain a separate business tax certificate.
(2) It is required that a separate business tax certificate be obtained for each location that a business is operating from. In this case, the new office space would be a different location from your home. According to the Office of the City Treasurer's website, it is the responsibility of the business owner to advise the Business Tax Office of relocation of the business by calling (619) 615-1500 or by email [email protected]
This answer is for informational purposes only and is not intended as, nor should it be relied upon as legal advice. No attorney-client relationship is created by this communication.
Question (1) and (2) are best answered by a local San Diego attorney and/or by the city/county.
But here's my take on business licenses in general and whether you "need" them. To me, business licenses are largely just a local tax on local businesses. Its a source of revenue for the muni imposing them and in return you do not really get much. Sometimes you need the license to clear a roadblock to get in a chamber of commerce or BBB, but otherwise they do not provide you with much of a tangible benefit. The muni imposing the license of course wants to you to have one, but whether you need to, if often really a business decision weighing the annual costs against potential penalty costs, if any.
As to question (3), if you have consistent business volume (with teaching or performing) you should consider forming some type of limited liability business entity, such as a LLC or corp. However, those types of entities are not unlimited liability, you will always be liable for your torts you commit, whether they are intentional or unintentional (e.g. negligence). So the limited liability aspect protects you more from contractual obligations that might run afoul. But even there, many of the entities you might have your LLC contract with, e.g. lenders and potentially commercial landlords, will insist on a personal guarantee - to get around the limited liability. But with respect to contracts of service (e.g. teaching) with your students, they likely do not have the business savvy to insist upon personal guarantees, and so any such contracts which might run afoul you would likely find some personal protection from liability, with the liability falling onto the LLC, assuming it is the LLC that contracts with your students.
Anyway, I suggest contacting a local San Diego business attorney.
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