It’s definitely not the fun stuff. It pales in comparison to the powerful high that comes from attending a birth. You love the work, you are building a strong clientele and things are going exactly how you want…you love the power of owning your own business! …until you get a notice from the IRS that you are being audited! Nothing will kill your business joy faster than a hefty penalty for failing to collect and submit sales tax, or not having a license! Setting up your company so that is lawful and legitimate isn’t the most exciting part of our job but it builds a strong foundation to grow your company and makes your work more respectable and sustainable.
When you start taking money from clients for the work you provide is exactly the time when you should also take on the great responsibility of making sure your business is following all the legal requirements for your area.
I’ve compiled a list of things that a doula should do to be a legal, legitimate business. All of them can be summed up with one sentence:
Know the Law, and Follow It!
This is one area where ignorance is not bliss, nor does it work as a legal defense if you get caught.
Must dos:
- Find out if you need a business license. This varies from place to place, but generally business licensing is handled on the city and/or county level. Don’t trust the word of someone on the internet who tells you “In (whatever state or country) you don’t need one.” or “Because my income is hobby income according to the IRS, I don’t need one.” Pick up the phone, call your local city or county government. Describe what you do and ask if you need a license for that. It is your responsibility to check with your local government. If you need one, get one!
Find out what the sales tax regulations are and follow them. (Short version, if you give ANY tangible item, it’s subject to sales tax.) Again, you’ll need to pick up the phone and make some calls to be sure you have correct info. - Report your income and pay income taxes on it. Don’t believe that you don’t have to report under a certain amount, that’s a myth. http://www.forbes.com/sites/kellyphillipserb/2012/02/09/ask-the-taxgirl-reporting-income-under-600/ You need to report ALL your income. Keep in mind that since you are (probably) set up as self-employed, you’ll be responsible for the regular income tax AND the self-employment tax . Remember the effort to get it right will be much less than the stress and effort of an audit! In the US, most small businesses can file fairly simply, using the IRS Schedule C. It’s one page long, and lists pretty simply the income and expenses from your business. My husband and I each have a business, so we file with 2 of these forms every year. Obviously, your situation may vary, and if you’re unsure, get advice from a tax pro.
- If you are doing business with a name that isn’t on your driver’s license, you need to register your business name and probably file a DBA (stands for “Doing Business As”). This is what gives you the right to use the name and prevents anyone else from using it as well. I’ve seen more than a few doulas start their business as “Labor of Love”, not knowing that that name is already legally spoken for in this state. Here is where you can find out if the name you want to use is available. If it is, there will be a link to where you can register it online. You also wouldn’t want to invest in a domain name, a logo, printing business cards, etc. only to find out someone else has registered this name out from under you!
Luckily for you, the State of Utah has made it simple to do most of these all at once, with its One Stop Online Business Registration that allows you to register your name, get a sales tax license if needed, and get your business license at the same place!
Have a good, legal contract. Working without one is just plain stupid. Even with friends and family. ESPECIALLY with friends and family! Clearly spell out what is included in your services, what your scope is, when they need to call you, etc. If I had a dollar for every time I’d heard a doula complain about a disagreement with a client that could have been easily resolved with a contract, I could vacation in Europe!
Good to dos:
- Consider how to structure your business. You can legally operate without creating a business that exists separate from you, but it may not be such a great idea. If you don’t form an official business, there isn’t any legal distinction between your business and you. This means that if you get sued, you could lose what is owned by the business AND your home, car, retirement accounts, etc. I personally hired Chris Lewis to do mine and he was worth every penny. He’s married to a doula so he understands the business, and that helped quite a bit.
- Open a bank account in your business name. Run all finances through the business. Nothing will wise you up to your true profitability faster than separate finances! This is also an important step in making sure the personal and business are separate. You can put a lot of money and effort into establishing an LLC, but depositing a check from a client into your personal account co-mingles the money and can be used to invalidate that separation. Why go to all the work of creating a business, and then ruin it by paying your electric bill from the business account?
- Insurance! You’ll want to look into liability insurance that will cover you in the event of a lawsuit. Please don’t fall for the “I don’t do anything clinical, I can’t be sued!” line. ANYONE can be sued for ANYTHING at ANY time. And even if you are completely in the right, it’s nice to have insurance to pay for your defense. I personally use C, M & F for my doula insurance, though you may want to check into other options as well.
- Get a professional website. One that represents you well, and is not a freebie. A Facebook page can be a great marketing tool, but it is not a replacement for a real web site. Nothing says “Not a real business!” than a URL that includes “wix.com”, “blogspot.com” or “WordPress.com” (And please, please, no music!)
While it can seem overwhelming, there are some great (often free!) resources available for small businesses. A great place to start is the Small Business Administration Utah Office. There’s even a free online course on starting your own business.
Don’t try to rationalize yourself out of following the law. It’s not worth it.
Photo credit: All images in the word “Utah” are copyright Andrea Lythgoe and are used with permission.