Hello, I started making money online this year. I made some profits, but I also spent alot of money to make my profits. Normally, under a firm, I could just deduct all my expenses from revenues, and the profit formula would be " Profit = revenue - expenses " The problem is that I don't have a firm and all my ad networks are under my personal name. So, in my case " Profit = revenue " according to the tax laws. Thus, I'm screwed pretty bad as my expenses were pretty big and the actual profit is quite small compared to the revenue. I'm assuming I can't do nothing now, but I want to make sure this won't happen in the future. So, I want to start a firm, get the tax id, so I can deduct my expenses. Do you think I should incorporate? or just sole proprietorship? What kind of a firm do you have? How does this work with adsense and YPN? Will they switch my name to the firm's name?
You can still have this as business income/expense on your returns. Time to do like the rest do an talk to an accountant. Good luck
Yeah I'm not sure what the problem is. Whether you have incorporated or not doesn't matter. If you are in the US, then as a sole proprietor you can still claim business expenses against the revenue. You should definitely speak with an accountant before you prepare your taxes.
paying $300 for an accountant hurts. Dropping off a 2 foot high stack of paperwork and not having to worry about my return is great though.
Aboutn changing your account from a personal to a firm one : From Google TOS : From Adsense Support : Cheers
I believe the other folks here are correct - you can take expenses against income as a sole propietorship. That's not why you would incorporate. You would incorporate so that: 1) You can insulate yourself a bit against claims brought against the company 2) You can take investment from other people into the company 3) You can allocate income and tax related losses among the folks associated with the company. It varies by state, but even doing it yourself, it is going to cost you a few hundred to a couple of thousand to form a corporation, and you will have annual expenses, etc., in the hundreds related to it every year. If you incorporate, the next question is which kind of corporation. Basic choices in the USA are a Subchapter S (income and losses pass straight through to you without being taxed at the corporate level), Subchapter C (income and losses are taxed and credited at the corporate level), and LLCs (Limited liability companies, with tax issues similar to Subchapter S corporations but differences relating to numbers of shareholders, classes of shareholders, etc.). If you have other income to shelter while a company is losing money in a start up phase, Subchapter S's and LLCs can be handy for doing that. If you are taking out of the corporation all the money it makes, you might not want a Subchapter C, because you pay corporate taxes and then again pay taxes on the dividend income. Typically, a mom and pop business will be a Subchapter S or a LLC. Bigger corporations tend to be Subchapter Cs. Which, if any, is right for you is a decision you should make only after you talk with a qualified lawyer or accountant familiar with the facts of your situation. If you decide to incorporate, you also get to choose which state. There are advantages to doing it locally, especially since you should get local business licenses in any event and probably will have to register as a foreign corporation, but some people like Delaware or Nevada corporations. Some people even like foreign corporations, in places like Panama, but the transaction costs are pretty high for those. There are plenty of places on the internet that will handle an incorporation for you a bit cheaper than your local lawyer, but your local lawyer is more likely to give you helpful advice on the other aspects of your business. Incorporating and choosing a corporate structure is pretty basic legal stuff, and most business lawyers, whether in a big firm or solo practicioners, should be able to handle it no problem if they are competent. For getting income as a corporation, you need a federal employee tax number, or EIN, or Google and the ad services won't pay you. You can sign up for one online. As this implies, and as you know, incorporating means you have one more tax return to file. Partnerships are another option for organizing your corporation, but that only becomes a consideration if you have partners you want to work with and might prefer a partnership set up to a corporation. The usual disclaimer - I am not your lawyer, and neither am I the lawyer for anyone who happens to read this. We do not have an attorney client relationship. This is not legal advice intended to apply to your particular situation. If you want legal advice to apply to your situation, you need to hire a lawyer and make sure they are familiar with all the facts that apply to you.
raycampbell great job! Corp S or LLC is probably the way to go for you. You can probably to this for $200-300 . Example here: http://www.incnow.com/ Google the terms: delaware corp s The state of Delaware has a "very friendly" reputation for corporations. You might want to investigate that. That said, going local usually offers the most advantages. Good luck,
While not a corporation, a LLC is a great way to go because of the pass-thru and no double taxation that is possible. Wyoming and Nevada are the better places to incorporate in because of laws. Nevada is very business oriented and is the only state in the union that does not have an open channel with the IRS. Check your local state first to see if it fits your needs though. An LLC setup will run a couple hundred if you do it on your own. Additionally, you will need RA in the state if you don't have an address in Nevada. If you do have an address in NV, the RA fee is $25 last I checked. The yearly fee for the annual list is $125. Setup with the SoS is a pretty easy task. If you do it on your own, make sure you pay for certified copies of your paperwork because the bank will need them to set up an account for your new company. As mentioned, you will need a EIN as well, which is easy to do--one page application. In REI, we use LLC's as a method of asset protection. You really should not be doing business, in this line of work, without a corp or LLC. Good luck!
Actually, I think LLCs are corporations. They are kind of hybrids, and for tax purposes they in some ways look more like limited partnerships, but for limiting liability I believe they act as corporations. This is really important, because in a limited partnership, the general partner can be personally liable for the bad acts and liabilities of the partnership. The key advantage of the LLC, I thought, is that it combines the tax benefits of LLPs with the corporate liability barrier of a partnership. Of course, I got my law degree in 1983, and have not practiced full time since 1996, so it could all have changed since I last looked. If it matters to anyone here, they need to talk to someone up the curve in the state where they plan to incorporate. I am not offering anyone legal advice here, and I do not have an attorney client relationship with anyone here. I wouldn't incorporate in Nevada, or overseas, or anywhere, on the theory that thereby you can hide your income from the IRS and so avoid paying taxes you owe. Actively defrauding the IRS is a bad idea, because not only is it criminal, it is the kind of criminal that they really like to send people to prison for.
First, I was not talking about defrauding the IRS LOL. The point is some degree of privacy is possible from others--I just mentioned the IRS as an example to illustrate the strength of privacy that can be obtained. You definitely don't want to mess with the IRS. Pay what you owe and move along. Second, LLC's are not "corps". While they where created out of a necessity for a hybrid, they are not officially corporations.
There are more reason to have a Nevada corp... the one we like is the privacy. A Nevada corporation has minimal reporting requirements with no requirement for the names of the stockholders to be a public record. This can be good for numerous reasons.
Add the income, deduct the expenses, declare the difference. I doubt you have much to worry about so long your annual income is less than 1,000. This may or may not include expenses, I can't remember exactly but you may be able to do it under Hobbies, unless that has changed it offers considerable options for small, part-time expenditures / gains... As for me, I have a real-world business (completely unrelated) and the whole domain thing goes right in with that, thou I find it is not profitable, but more like a break even thing (+ income - expenses = 0). Reason I brought this up is because income / expenses is just over 1k / year for me and that, if I remember correctly, is what broke me away from the 'hobby' path. Still, I'd check it out, it's an idea that for a long time, made life easy for me. p.s.: I use quickbooks to do my tax return, it REALLY saves my tail.