Who here has set up an LLC for their website/s

I've finally decided it's time to create an LLC for my company.

With January's stats in, and adding advertisements, I'm slated to break my 20K revenue 2008 goal.

I've tried to create other sites and have lightning strike twice... but so far a no go. Regardless, being taxed at my personal rate... well... I'm getting pooched.


It seems pretty straightforward in doing this. Any pitfalls I should look out for? Anyone want to share their personal experiences?

Thanks in advance.

While I realize that real "true" assistance on this site is rare, I do appreciate those who have actually helped in the past.


Carter

 

So anyways...

I download the form off my state's webpage. 5 pages long, but 3 of them were instructions. Very simple to do I might add.

$100 fee, and off to the post office I go.

In 30 days, they'll check the name I've given them, and if it's not taken (which it's not, they have a field online to do a business name check), then you get your Tax ID Number.

With that, I'll go get a business bank account, and start keeping track of the business funds and expenses.

---------------

Negatives - You can't co-mingle the money (personal and business), and you need to keep separate books, and stay on top of things.

Positives - You're business will be taxed as a separate entity. So if you're in a high tax bracket now, you won't get hit with 40% taxes on any extra money you make with your online business.

You can also write off things as business expenses that you couldn't for person things. Everything from server fees to the new computing equipment are write offs for you business as expenses. This will lower your tax burden also.

I'll report back in 30 days!

 

hey painthappy..

cheers for the post.. I have always been thinking about this, but never got around to it for any of my bigger sites.. is there a threshold you think that we should adhere to until we should register the company?

Have you registered a site on its own as an LLC, or have you registered a holding company?

 

I was thinking of getting incorporated but was scared off when I heard that you basically have to hire an accountant since doing your taxes becomes much more complicated..

 

Good questions.

Here's how I finally reasoned it.

1. To make sure that I'm making enough money to make it worth my while. In other words, worth my time and effort to keep extra books.

Examples: If I'm making $10,000 via my site.... (I'll use evenish numbers to make this readable).

Personal Taxation:

If It's just under my PERSONAL tax id: I need to report the $10,000 and that will be taxed at: 30% ( Let's assume a higher tax rate since you already have a full time job).

That means your $10,000 you made, you need to pay the IRS $3000. This Net's you $7,000 for the year.

LLC Taxation:

Now let's use the LLC example:

You made $10,000 for the year, but in this case you are a separate entity. So instead of getting taxed on your 10k at 30%, you only get taxed at the lowest 15%. - Immediately your taxes are cut in 1/2, from $3,000 to $1,500.

Now remember, this isn't YOUR money... This is the companies money. If you want to get paid, you'll need to pay yourself. I'll get to that part in a moment.

But first... You have Server Expenses. OK. For tax purposes you get to write off your expenses vs your income. This is what you can not do personally.

So your balance sheet will look something like this:

$10,000 - Income
($ 600) - Server Fee ($50 a month for 12 months)
($ 600) - Phone Bill ($50 a month for 12 months, write off your cell phone as a business phone)
($ 500) - Site Redesign Expense - Paid a programmer or something
($ 6,000) - Payroll - Paying to yourself, $500 a month for 12 months, or a 1 time year end bonus.. however
---------

$2,300 - Left in your business bank account at the end of the year and on your TAX books
x 15%
--------

$345.00 TAX to the IRS

Now, the $6,000 you made will be taxed at YOUR tax bracket on your personal return, so let's assume 30%

So:

$6,000
x 30%
-------

$1,800.00 - On your personal tax return
+ 345.00 - On your business tax return
----------
$2,145.00 - Total Taxes Paid

Minus the $3000.00 you WOULD have paid, you just saved yourself close to $1,000 in taxes, that can be turned around and used for creating a new website, or new venture.



Oh, and if you hire an accountant, you can expense that business portion too. Use your car? Expense that... Bought a new computer? Expense that.

There are things you can not write off/expense if you're just doing it personally.

This also limits liability for being sued, etc. They can't sue you personally, only the company. Now I have nothing to worry about on that end, as I don't do anything funky, but reading what some folks on DP do, dang... I would be worried. Far too many scammers and/or scammy style products being sold.

Like that "traffic" I bought for one of my new ventures. Hah... What a joke. Their "traffic" numbers and Google "Analytics" are no where near jiving with each other. I'm talking off by thousands of visits I supposedly paid for.

Anyhow... That's my business lesson of the day.

Rules vary from state to state, but mostly remain the same. SBA (Small Business Association) can be found in each state, and they offer free, or really cheap courses to assist you in this department.

 

First of all you need to spend money on an accountant ... that put me off till now

 

I had incorporated a company in Canada (LTD) a while back and it cost me over $1,000. I then had to hire an accountant to do the books.

It wasn't for my website business but none the less it's an incorporated company. Honestly, it wasn't worth doing it. It never made any money. Now I've got a business name registered and a business bank account.

Maybe if my business hits the $20,000 + range I'll consider it again. That probably wont be for a long long time lol

 

Thanks for that painthappy

really helpful! rep+

I was always confused about this, and it seems like a pretty worthwhile thing.

Thanks
Mike

 

Good read. Great information.

 

From what I understand forming an LLC with one managing member (i.e just yourself) accounting is fairly straightforward. It is only with 2 or more owners/managers that accounting becomes cumbersome.

 

painthappy, do you do your books yourself? File taxes quarterly or yearly? Use any bookkeeping software?

 

Honestly, I have an accountant to my personal taxes. I'm in a family business and the same person that does the business books, also does mine at no extra charge, so I don't pass that up.

Taxes are filed annually. Unless you make a certain amount of money, and then you pay quarterly, etc.

I just mailed in my LLC application with the state along with my $100 check, and I'll be doing both the books and tax reporting myself.

Since it IS just myself, the book keeping will be straightforward, and the taxes will be even easier to do. Worst case, I'll have the account do it, and just pay him and expense his cost.

 

You will save more money with an S-Corp than you will with an LLC.

 

Dumb question: If I created an LLC, would I have to get a credit card with the company name? Can I still use my personal cc to pay for expenses?

 

Yes, if you want to limit personal liability. Any intermixing of personal/business activities can mean you're personally liable for any legal actions against the business.

 

You could pay on your personal card and submit it to your company for reimbursement as an employee submitting an expense report. But MT is right that you should try and keep your personal and business as separate as possible.

 

YOU CAN EXPENSE EVERYTHING WITH an sole pro as well. and file a schedule C

in california you pay a minimum state tax of 800$ for listing as an LLC to cali, so here it only benefits for liability protection.

 

My son and I have an LLC for an insurance biz we own. The accounting is not cumbersome at all as we are 50-50. You simply have to delegate the income and expense amounts to each account.

If you use a bookkeeping program or a spreadsheet you can accomplish this pretty easily. I don't believe I'd do an LLC with more than 3 people but that's me.

We live in NV and took all the forms off the Secy of State's website. Faxed everything to them along w/cc # so they could get their fee. Took 7 days to turnaround. Quick like fox to quote an old saying.

We paid $75 to get it done. Will have to send in another $75 along with the member list by 2-28. So for $150 total we are done.

I don't know if this helped anyone but it was our experience.

 

I went through legalzoom they handled everything for me then I have a offline accountant for the rest...

 

I think NV and DE are the two best states for doing LLCs or corps, at least when it comes to yearly cost savings. So even if you don't live in sandalwood's territory, you could incorporate there with just a registered agent.