I've been running my internet business for years as a sole proprietor. It seems like I've heard that it is best to incorporate as there are more tax benefits if you do so. Almost all of my business is adsense and various paypal transactions and I have no employees. Does anyone out there have a recommendation? How is your internet business set up? Many thanks in advance for your advice... I humbily await your answers.
This was discussed yesterday.. check out this thread for more info - http://forums.digitalpoint.com/showthread.php?t=700666
Get an offshore company bank account in Panama, Belize or Mauritius, and save all your money from the BIG Brothaaz... If you've got $10 Million, then open an account in Switzerland... That's the best option after heaven or hell, as you might like... Do your due diligence though... It's some hard earned money, I'm sure... Do give back to the society, by "creating wealth", if you know what I mean... and I don't mean charity...
If your business operations remain similar, you probably won't see much tax benefit going to an LLC or S corp. Limitation of liability would be better though. And a C corp would be a little over the top...
I disagree with MTbiker. I opened a S-Corp and didnt have to pay any taxes on my internet income last year, as I invested all my profit back into my business. Gas, new computer equipment, domain names all became deductions. As a general rule, if you open a business bank account you will only pay taxes on what is in your account at the end of the year (provided you started the year at 0) If you spend all the money in your account on business expenses, there is no income left taxable. So come December if you have $2000 in your account, you can pay taxes on it, or buy a kick ass new computer and owe practically nothing =) Always speak to an accountant first. Only use what you read on internet forums as a guide - my post included.
This is maybe true if you are using cash-based accounting. In the usual accrual accounting (conform to the GAAP) taxes paid are not directly correlated to the balance in the business account, but rather to profits realized during that period. Moreover, assets purchased are depreciated over time and not immediately.
LLC is the way to go. I would recommend you look into this as an option. Has better tax benefits, in my opinion, over Incorporation and there are less hastles in terms of regular filings and is much simpler to operate. For example, there are no board of director requirements that you find with a standard Incorporation. Especially considering you have no employees, this is the way I would go. There's lots of information online, just Google "LLC benefits". Good luck.
Thanks everyone for your tips and suggestions. I think the main thing I have heard is you don't pay as much because you don't have to pay into social security... so your taxes might be cut as much as 50% (if you play your cards right). I guess the best thing to do overall is get an accountant and go from there...
Yep, I deduct everything I can as a sole proprietor... but you get hit with a massive self employment tax.
LLC is the way to go. Unless you're really cranking in the big $, it's too early for a corporation. LLC gives you cheap, simple protection against lawsuits so that your business life doesn't have to become entangled with your personal life (all you can lose at most is company assets). Tax deductions can be performed on any type of business (sole proprietorship and LLCs included).
I just filed for a LLC... I think it will help. Plus, if I get sued they can't take my personal assets.