Personal or Business income...Which is better?

I have a business...a sole proprietor business that is closely related to my website stuff (adsense, TLA, selling sites, etc).

My business has its own revenue stream (website design).

Should I route all of my earnings through my business? Or should I keep them separate as I have been doing? If it matters, both my personal and business incomes are about the same annually.

Which is better for taxes? Are they different since my business is a sole proprietorship anyways?

Thanks!

Brandon

I'm in CA if it matters.

Oh, and I'll green rep anyone who gives me any decent answer/advice! (hopefully bribery works for you)

 

Turbotax says LLC's or Incs have a lesser of a chance of an audit over a business in your own name.

I would say incorporating it into your business would be best

 

Thanks floodrod...I want to stay with a SP right now for simplicity sake. I've thought about an LLC or better but decided against it for the time being.

I'm wondering more about the tax implications of putting the income into my SP or keeping it in my personal name.

 

if you are already registered under a business name report everything that the business has made plus your expenses eg. internet costs per month, phone bills etc.

if you are thinking about registering a business unless your makes 20k+ i would say there is no point in reporting it if it is infact a cash or in most online businesses a paypal only business.

i hope that helps a little.

 

business - why? becuase, you get taxed after costs. Personal = you get taxed and the rest is to pay your costs

 

Hmm for the moment i'm personal

When the sums will get higher i think i will open a company

It all depends on how mutch you are making

 

The other thought I had was deductions...I can make deductions if I have enough business income, but can I deduct personal expenses?

 

Precisely... tax laws are written in favor of businesses not individuals.

-J

 

That depends... some things can be purchased by the business and deducted. Like a vehicle used for business purposes.

-J

 

As a sole proprieter , I believe it all ends up in the same money "pot", because you report your business income as part of your personal income tax. So just make sure you take business deductions where appropriate and it shouldn't matter either way.

However, you should really look at a more formal business entity, because if you ever get sued, you could lose everything you own not just business income.

Filing as a limited partnership or LLC is really not that difficult. Most states have websites where all of the information is readily available. I have heard though that LLC's can be expensive or are not recommended for residents in California but I don't know the specifics. Take a trip to the library, there are books that explain what you need to do step by step and where to get the forms.

Also, you may want to consider incorporating because the tax advantages are much greater than a sole proprietor. However, it all really depends...

 

I live in Europe, but I think businesses are equal everywhere (I've learned tax and corporate laws for my own). So I vote for business form... let me give you some pros:
1. I'm sure you like you business, but some day (better when it will be the most profitable year), you will wish to quit. It's obvious that selling business when all assets are registred for a company is easier.
2. Taxes. It's not just about saving, if you have a corporation then you will be able to invest before taxes. So, if you goal now is to get money in cash and your cash flow is low, then it doesn't metter a lot. But if you wish to invest in some actives (such as web 2.0 projects!), then corporation is better.
3. Business as corporation will make you fill better, you will probably see more opportunities... I don't know why but it seems to work for me and my friends.

 

Thanks guys...that is pretty much what I'm looking for...the deductions are what is going to make the difference. I'll talk to my CPA about the exact specs on what can be deducted...