Is a Weblog a Business?

Clinko asks: "I currently have a couple moderately successful websites with Google and Yahoo ads. Combined, they will generate a couple thousand this year. (Sounds great, but read on...) The problem is that I know nothing about starting a business, filing taxes (U.S.) on such, or if I even need to be a licensed business. Will I need to start a licensed business on income generated from ads? I'm sure someone from Slashdot has been in a similar situation. What was your solution?"

Comments

Sole Proprietorship

[evilpenguin]

You are a sole proprietorship. Your income will be reported on your personal income tax. You should get a 1099-MISC from your ad agencies.

As others have said, you can talk to a lawyer and/or an accountant to see if you could save money by doing something more "advanced," but I do the above. It adds two forms to your 1040: Schedule C and Schedule SE. About half your income from the blog will go to taxes.

Re:Sole Proprietorship

[enrico_suave]

IANAA but the parent is right.

I have a comprable situation with my sites and income derived there from.

You will want an accountant to help sort out which business type is best for you based upon the amount of liability you're willing to personally take on, what tax structures/consequences, amount of paper work you're willing to deal with, etc.

You seem to be running a sole proprietership just by the fact of getting this extra income and you most likely used your name and your social security number to set it up with google ads/yahoo ads and will get a 1099-misc from them to file as additional income. As I mentioned in the previous paragraph you'll want to consider which business arangement (with help of accuontant/lawyer) makes sense for you... sole proprietorship, LLC, Inc. etc...

There are benefits and drawbacks to each (hence the professional help).

It probably makes some sense to get some sort of legal entity registered with your state/etc and business classification so that you can subtract business expenses from your income so that it doesn't count as much towards your overall income. Again, this isn't tax advice, consult a professional... but if you have an online/advertising business some seemingly legitimate expenses would be: internet access (if used only for business purposes, or do a percentage), webhosting, advertising to promote your site, bank fees, probably a PC to do updates/edits, other costs incurred in relation to your topic/content *shrug*

It may or may not be worth the accounting headache, but that depends on the amounts we are talking and your personal tax situation.

You may also, assuming a day job, want to/need to adjust your income tax withholding to compensate for the extra income (or not... IANAA)

Good luck with your modest web publishing empire!

E.

Sole Proprietorship is Simple

[breadbot]

IANAA (Accountant), but I've done a few thousand dollars' worth of consulting -- never more than about $10k in a year -- and self-employment tax is simple. You just get a 1040-SE form and fill it out. The tax rates are a little higher (about 7.5% for me) than if you are employed because you will have to pay your own social security employer's tax (I guess part of social security tax is paid for by the employer). If you make very much, the IRS wants you to file estimated tax payments quarterly, but that's not too hard either. If you've been doing your own taxes, then you can definitely handle the additional paperwork. You can even include expenses on a 1040-SE.

NoLo

[_LORAX_]

"Tax Savy for Small Buisness" by NoLo press ... should have more than enough information to keep you out of trouble with the IRS. You can pick it up in any local bookstore. Look for the signature yello/orange books.

Trust me, they are excellent and colover all you need to know ( and a lot more ).

check state and local resources...

[enrico_suave]

Small Business Association

and someone mentioned NOLO which has a lot of articles (besides the publication mentioned) on legal stuff...

Good to get a sense of this stuff before seeing the accountant...

e.

Keep in mind your personal liability

[Pengo]

Just keep in mind that in a sole proprietorship, that your personally liable for your business. Most small businesses can cruise along just fine, but if you are worth a lot (house, car, etc), I wouldn't risk it. Also, if you plan on posting things that are potentially litigious on your weblog, I would consider at least a LLC. I am not sure if there are messed up laws that could potentially tie you up in litigation from the actions of your users, who knows (a lawyer, definitely not me).

You can usually do that for under $250, and under $500 with a lawyers help. I seem to remember thats how the costs for us, our small logistics software house, to incorporate LLC in Nevada.

Good luck with your venture!

Re:Keep in mind your personal liability

[Ken Hall]

I only found an accountant AFTER I set up my S-Corp, and he told me I'd done it slightly wrong. He actually recommended an "LLP", which is a new type of business, although I don't know all of the details.

The problem with going down this road is that (like I said in my other post) it opens up a whole new level of paperwork.

The idea, like he says above, is to limit your "liability", so if someone sues the blog, they (theoretically) can't take your house, but in practice, if things aren't set up EXACTLY right, they can "pierce the shield", and get you anyway.

I have a friend who ran a successful computer service business as a Sole Proprietorship for YEARS. He avoided the liability issue by doing whatever he had to to keep his customers happy. In the long run, he found it was less expensive than trying to protect himself by incorporating.

YMMV.

Be cautious about "business" deductions

[mutterc]

You will have to report the income, as "self-employment" income. That's not any more difficult than anything else relating to individual taxes.

If you want to consider this a "business" and write off the expenses related to it, the IRS says it's got to be an activity carried on for the purpose of making a profit, not just a hobby that happens to generate income (even if it's a net profit). They have some nice, vague criteria on their website. Being considered a hobby doesn't free you from paying taxes on the income, but it does prevent you from deducting the expenses.

As for needing licenses, that's highly dependent upon your state, county and city (any of them might require licenses). I live in Raleigh; North Carolina has a "Business License Information Office" you can call, and they will tell you what licenses you need. Hopefully your state / locality has something similar.

My guess would be that nobody will care about licenses since you're not "engaging in a trade". However, only your state / local government knows for sure.

Re:Be cautious about "business" deductions

[sartin]

IRS says it's got to be an activity carried on for the purpose of making a profit, not just a hobby that happens to generate income (even if it's a net profit)

Actually, the IRS allows you to deduct hobby expenses to the extent that they offset income. IRS Publication 529 says:

You can generally deduct hobby expenses, but only up to the amount of hobby income. A hobby is not a business because it is not carried on to make a profit. See Not-for-Profit Activities in chapter 1 of Publication 535.

Liability

[the eric conspiracy]

The primary purpose of forming a corporation is to shield your personal assets from business creditors, secondly to gain favorable tax treatment. I know someone who failed to do this and lost their house.

Be careful, see a lawyer, get the appropriate insurance if you are incurring any sorts of liability.