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Why did you become a doula? What are your intentions for doing this work? Doulas enter this profession for many reasons. If you became a doula and your main intent is to do this as ministry work or to help friends and family, you may not necessarily have to classify your work as a business. If you became a doula as a way to earn income and eventually make a profit and you live in the U.S., you do have an obligation to make sure you are in compliance with state and IRS requirements.

If you’re not certain about the differences, Nolo has a great article about determining whether you have a business or a "hobby business". The reason you want to know the difference is so you can properly record your losses against your taxable income on your federal income tax returns. The IRS wants to see that a business is making a profit for at least 3 of the last 5 years. If you don’t, that may raise a flag and you may get audited. You will need to prove that you are making an effort to run a profitable business.

If you know you want to create a bonafide business, here are ways that can prove this intention to the IRS in the case of an audit:

• You have business cards and marketing materials
• You have a bank account just for your business
• You are advertising your business
• You maintain current business permits and licenses
• You are keeping accurate records of your income and expenses

Regardless of how you claim your income and losses on your federal tax return, you still need to check with your local and state government agencies to see what the requirements are for you to run your doula practice. You may need a business permit, and if you sell products along with your services, you may need to obtain a seller’s permit and pay sales taxes. To see what is required in your state, refer to this website for links to your the appropriate government agencies in your state.

After visiting the sites referred to in this article, if you still have questions about the legal requirements for your business, please make a point to get your questions answered. An excellent resource to use is the Small Business Administration, which offers services to small businesses through Small Business Development Centers, Women’s Business Centers and SCORE. Follow this link to find a local office near you. You may also want to talk to an accountant to get an opinion based on your financial situation.

As always, email me with any questions or send me a tweet @savvydoula.

Tomorrow we’ll take a look at liability insurance for your doula business.

Tags: doula business tips, hobby or business, how to start your doula business, state requirements for starting a business

Other Savvy Posts You May Enjoy:

1. Quick Tip Wednesday – Learn Tax Basics for Small Business Owners Directly From The IRS
2. Day 19 of Reorganize Your Doula Biz – Business Expenses and Taxable Deductions
3. Day 24 of Reorganize Your Doula Biz for ‘09 – 8 Tips For Choosing An Awesome Business Name
4. That Time of Year is Creeping Up on Us Again. Are You Ready?
5. Day 20 of Reorganize Your Doula Biz – How Much Money Will You Make In 2009?