Since I have started getting > $1000 checks from CLickbank, I thought it might be a good idea to make my online business a real business. I decided to begin as a LLC, and this morning I looked into what it would take to start a LLC, and I must say it was easier than I thought it would be. It took all of $87 and 30 minutes this morning to start an LLC with my state (Indiana) and get a EIN number from the FEDS. Everything is online now! I started a real world business about 5 or 6 years ago, and it was a lot more mailing and paperwork, this was easy! Anybody have any advice on running your clickbank/IM business through an LLC?
As a single member LLC, there was no reason to have any documents drawn up, since state law directs how a LLC should work, and there isn't anyone to fight with since I am the only member, so all I had to pay was the filing fee with the state, and the approved me literally 20 minutes later.
They don't have LLCs in Canada, but I registered a business a few years ago. $105 fee (for name search and to be registered for 3 years), and fill out one side of a sheet of paper. Name, Address, Business Name, What does the business do, Signature and Date. It took me 5 minutes.
How were you able to do it so cheaply. Are you using an online service as it cost me double that (one factor is my state fee is higher).
I formed the LLC on my Secretary of State's website, and of course the IRS part is free (and instant now). Since I am the only member of the LLC, I don't need an operating agreement. Most states have laws on the books which tell how a LLC should work, and Operating Agreement just augments and clarifies between partners. So basically I filed myself, and didn't have to pay for advice/preparation/documents.
There's no benefit as a sole proprietor. If you don't register a business, you're technically a sole proprietor anyway. The benefit comes when you incorporate and weasel yourself out of taxes. It isn't worth it until you're making too much money. If you incorporate, you get limited liability, so i think someone might sue you, it might be something good to have.
The typical fee in North America is roughly $100. That's the standard fee. LLC's are really different than a standard corporation. I believe the IRS treats you like a sole proprietor if you're the only stock holder. Most places (that don't have LLCs) will treat corporations differently if you have under 10 or 15 shareholders. We live in a free market system, so it's generally pretty simple to start a business. It's when you have IPOs and a thousand investors and want to create bonds, that you probably need lawyer.
Do you need to register a business to claim expenses etc when filing taxes? Or is everyone at default a sole proprietor and you only need to register a business if you want limited liability or incorporate?
By default, you'd be considered a sole prioprietor under your own name. That requires no registering and you are able to do write offs. You incorporate if you want limited liability and/or reduce your taxes.
If you are making real money, you probably want to create a business entity. Otherwise, if you don't do things right, your sole proprietorship could be classified as a hobby, if you don't meet requirements.
I think that is good advice ScoTech for those people that have a regular job and just do affiliate marketing part time. You gotta watch yourself if you're not making a lot of money and have high write offs. If you make $1000 affiliate marketing and you write off $5000 worth, they'll be suspicious lol.
Hey I'm also a Canuck, but what do you mean by incorporating to reduce taxes? Do you mean because you can file the income entirely under the corporation name (instead of under your own name)? Right now I have a full time job, so I assume that the money I make from IM would be currently included in my personal income and jack up my tax rate because my personal income would be substantially more. Incorporating would allow me to file two tax claims (one for personal and one for the company) and therefore I pay less tax?
Spliffe, I did a major post on taxes and it's completely Canadian friendly. Check'em out. part 1 and part 2. You'd probably be in a good position to incorporate or at a minimum drive money into RRSPs to drop the tax burden. Basically, if you incorporate it, the money earned will be taxed at a corporate level. There are tax brackets for corporations too and they start at around $400,000. I'm assuming you're not making that much lol. I'm not sure what province you're in, but typically 14% is the tax rate. I don't know your financial numbers, so I can't really guide you. When it is stuck in a corporation, you can't spend it yourself. That's the only catch. If you spend it yourself, you have to get your accountant to work that out and it comes in as being paid. It's hard to guide you. Take advantage of what you can to best benefit yourself and weasel out of taxes.
Just about all states accept online filings and they are all just about as simple as ScoTech described. Limited Liability Company Center has a direct links to the websites of every Secretary of State (or its equivalent) in all 50 states and the District of Columbia. That site also has articles explaining the advantages and disadvantages of LLCs. Not every business needs to have an entity like a limited liability company or corporation, but in most states they are so easy and inexpensive to form on your own, you have to ask yourself "why not?" rather than "why?". The main advantage, of course, is limited liability. In this day and age when people sue for just about anything, the extra protection, though not perfect, is certainly something to consider.
Supper: Thanks for your help man, I hear ya on getting out of as much taxes as possible. Your blog looks good, I'll have a look
Supper I read your blog, some good stuff there. One thing I would like to point out though. If you own a house and are writing off a percentage of your mortgage into your business (i.e. 10% of your mortgage is a write off), if you decide to sell that house, the percentage you have been writing off is considered taxable income. So if you've been writing off 10%, and you sell your house and receive a gross profit of 100K, you will be taxed on 10K of it. Unfortunately it doesn't work both ways (tax write off and receiving a profit of what you've been writing off), wish it did though.
Spliff, I don't think it works that way because when you sell a house it isn't considered income. I believe that falls under capital gains/losses. I'm just extrapolating here, but I'd assume the capital gain would be the difference between the value of the house when you started writing it off and when you sell it. If you started your business the same time you bought it, at lets say 100k. You use it for 10 years and you sell it for 150k. The capital gains would be 50k, 10% of that is 5k. And in Canada 50% of capital gains are taxable incomes. So 2.5k is added to your taxable income which isn't much. If your house goes down in value, you'd get a write off because the gain would be negative.
Someone sent me a PM asking why I chose Indiana to start my LLC, and the answer is simple, that's where I live!