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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?"
The best and only advice I can give you is to find a good accountant and a good lawyer. If it makes sense to turn it into a business, they will let you know.
Slashdot is good for somethings, this is not one of them.
Do not go to H&R Block on this one. Go talk to an accountant -- it'll cost you $300 which you can then turn around and deduct. You probably are a sole proprietorship -- but if you have doubts, talk to an accountant. Do you live in the US? If not, take the money and run -- from your own government.
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.
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.
Build Your Own PVR/HTPC news, reviews, &
"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 ).
If your advertisers issue checks directly to you, in your name, you really don't have to do anything except report the income on your personal income tax return. Even if they don't issue you 1099s, you should do this. They pretty much HAVE to issue the 1099s though, in order to write off the expense. It's a sort of cross-check, see?
If they're happy working this way, going farther is more up to you.
If you want them to issue the checks to a separate entity, like a company, you have to go through some additional hoops. You have to register the company name ("Fictitious Name") with the state, and then go to your bank and set up a Business checking account to receive the money. It's still YOU, YOUR income, you're just providing a separate pocket to drop the cash into so you can keep track of it.
The next set of levels come up if you want further separation of the company from you, if there is more than one person involved (partnership), or if you want to protect yourself from being sued. Then you need something like an LLP or a Corporation. Some companies won't deal with individuals or Sole Proprietorships because they don't like the trouble of issuing 1099s, so they will require you to set up a corporation. Reporting income from Corp-to-Corp payments is the responsiblity of the receiving party, so the payer can just issue the check and be done with it.
The problem with doing this, is it opens you up to a whole new level of paperwork and reporting for very little good reason. (One friend of mine ran an extremely successful and profitable computer service business as a sole proprietorship for YEARS because he just didn't want to bother with the paperwork.)
Rule of thumb: Do as little as your customers will accept and you feel comfortable with. As long as you pay the proper taxes on the income, generally speaking, nobody will bother you, and even if the IRS comes calling, you can show them you've followed the rules.
DISCLAIMER: I am not a lawyer or accountant, but I've had my own consulting business (S-Corporation) for close to ten years now, and I have friends and associates who also run their own businesses in various forms, so I have some familiarity with the ins and outs.
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.
Build Your Own PVR/HTPC news, reviews, &
Let me tell you, filing a business license is a great way to become personally acquainted with every level of government in your state, because they will all call you up with forms for you to fill out and taxes for you to pay.
Being a business is a licensed class, and unless you *need* to, don't do it.
What you have is a hobby. Keep it a hobby. If you're concerned about being sued, well a small business will not protect you, you'll still have to hide your assets anyway.
If you keep it as a hobby you don't have to pay taxes on the income, provided it doesn't exceed your hobby expenses. IF you keep it as a hobby you dont' have to file countless forms every three months, pay thousands ot lawyers accountents, etc. And if you keep it as a hobby you are better protected.
The only reason you would ever want to form a business is if you plan to sell stock, or if you need to form a partnership and have joint property.
Seriously. People have been told a lot of gruff, and of course, accountants and lawyers have spread the idea that you need to lawyer up and have an accountant going over everything.
But you don't. Regular old tax software will handle your small business accounting as far as the IRS is concerned (and if you get some you'll see the advantages to keeping it a hobby) The IRS recognizes hobbies as a legitimate area where you can make some money, and while they will want their share of it, tehy will only want a share of your profits.
Forming a business results in a never ending amount of hassle-- from a greatly increased amount of bulk mail to periodic calls and even visits from random taxing authorities you've never heard of.
I learned my lesson once, never again.
Also, if you do want to form a business for whatever reasn, consider forming it out of state-- nevada is a good state, or out of hte country, such as in the carribean. In that case, you just need to file a registration to do business in your state. Since the business is not domiciled in your state, its a much lower burden of paperwork and regulation.
And virtually every business friendly country, or business friendly state is likely to give you a vastly better level of business protection (privacy, insulation etc) than your home state.
Yeah, and you guys panned the ipod too: http://apple.slashdot.org/article.pl?sid=01/10/23