Maybe you started a blog on high desert gardening, or one on micro-brews of the Pacific Northwest, first-time parenting, iPhone apps, small businesses, saltwater aquariums… You’ve logged long hours behind the glare of your computer display, fought writer’s block, and tried not to get rattled by the occasional negative comment. Along the way, you’ve produced some really great content.
What may have begun as a casual interest has turned into an extra source of income, or even a full-time business. Most bloggers start off as a sole proprietorship (or in reality, many bloggers don’t even consider a business structure at the beginning). Now and then you might wonder if it’s time to incorporate, but it’s an easy question to procrastinate about…after all, organizing next week’s topics is a more pressing matter.
So when, or why, should you consider Incorporating or Forming an LLC?
- Is your blog making money? Do you earn your living online? If your blog is generating significant revenue through ad networks, private sales or anything else, it’s time to consider whether you can improve your tax situation by Incorporating. If your marginal tax rate (of all your combined personal income) is higher than the corporate tax rate, this is a no brainer. In addition, Corporations may be entitled to additional deductions not available to individuals. Of course, you should consult with a CPA or tax advisor on your own particular situation — and just remember, each month you delay may be costing you in extra taxes. And speaking of taxes, WebCPA reported that the IRS intends to increase audits on sole proprietors (and IRS statistics already indicate that the risk of an audit is greater if you operate your business as a sole proprietor). And speaking of taxes, WebCPA reported that the IRS intends to increase audits on sole proprietors (and IRS statistics already indicate that the risk of an audit is greater if you operate your business as a sole proprietor).
- Do you have liability concerns? It’s hard to imagine that sitting behind your computer puts you at any real risk of a lawsuit. While running a blog is inherently a less risky business than running a day care center or plastic surgery office, there are some liability implications for bloggers. For example, what if you unintentionally plagiarize someone’s work? Find yourself accused of slander? Or maybe you end up writing about a mobile prototype left in a bar? What if your major advertiser fails to pay, making it impossible for you to pay your own vendors, like any freelance writers under contract?I’m not a fan of scare tactics, but I am a fan of education. Certainly these are worst-case scenarios, and you’ll most likely never run into these sort of problems. However, if you’re sued as a sole proprietor, you’ll be sued personally. This means that your personal assets are all at risk. And what was once an interesting side project or a form of self-expression can end up wiping out your retirement savings or child’s college fund.
The bottom line is that Incorporation can be pretty painless and affordable. For those of you who cringe at the thought of paperwork, the LLC (Limited Liability Company) offers the legal protection of a Corporation, with minimal formality.
Whether you stay a sole proprietor or Form an LLC or Corporation, be sure to keep your personal and business finances separate; set up a business checking account and possibly a business credit card. LLCs and Corporations are required by law to maintain official business accounts. A sharp line between you and your business can benefit the sole proprietor too. It’s easier to organize (and justify) deductions at tax time. And in the case of an audit, it may prevent the IRS from looking at your personal finances…
We offer business filing services required for a variety of business needs such as forming a Corporation or Limited Liability Company (LLC), filing a DBA/Fictitious Business Name, Trademark Search and Registration services, conducting business in multiple states (Foreign Qualification Filings), modifying a business name or address (Amendments), Closing a Business (Dissolutions), Registered Agent Services, and Corporate Compliance services and supplies in all 50 states.
Here are some links relevant to the business filings services we offer. I hope you find it helpful:
Relevant Corpnet.com Links
Please note that while I can’t give specific legal advice for your specific situation, I love talking to small business owners and can answer any questions and help you navigate through what’s best for your business.