If I travel the country doing freelance work online, do I need a business or can I just claim it as extra income on my taxes?

UPDATED: Sep 30, 2022

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If I travel the country doing freelance work online, do I need a business or can I just claim it as extra income on my taxes?

My wife is a travel nurse and I remote work for my full-time job. If I were to do

freelance design and/or sell things on Etsy, do I need to create a legal business or can I just claim the income as extra income when filing my taxes? If I need to create a business, which state do I create the business in? The one I am in at the time or the one I am from? Not sure where to start.

Asked on December 28, 2016 under Business Law, North Carolina


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

There is no need to create a "business"--i.e. a legal or business entity, like an LLC or corporation--so you can just claim the extra income under your taxes. There are reasons to create a business entity, however: having an LLC (a "limited liability company") or a corporation will help protect the rest of your income or assets from most business-related debts or lawsuits. For exampe, say you breach a contract by not being able to deliver a design on time--if you had an LLC, the customer could only sue the LLC, not you personally. Or if you sold a product which injured someone somehow, without an LLC or corporation, your personal assets are at risk--but if you had an LLC, only the LLC's assets are vulnterable. Etc. 
The best choice for what you describe would be a sole member ("member" is "owner" in this context) LLC with partnership (not corporate) tax treatment, which means there is no separate taxation or tax return; rather, the profit drops to and is taxed as part of your income. The state doesn't really matter: you can set it up in your state of residence, for example. Forming an LLC is easy: any attorney who does business law or matters could create one for you very quickly and affordable, or you could set it up yourself using instructions found on your state's secretary of state website. Good luck.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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