>>>> What is the Best Business Structure For Internet based business??

Profile picture of the author RyanLima by RyanLima Posted: 08/18/2010
What is the Best Business Structure For Internet based business.

I am promoting CPA from 20 different networks and business is going great. Now I am thinking why not have a real legit biz structure.

I have bought a separate domain and have a business name chosen XXX XXXXXX Marketing.com

I have my EIN #

I have a bank picked out...



Now I just need to file with my state. I am the only one in the biz so I don't have another to form an LLC or LLP.

Should I Incorporate? Or stay as a sole proprietor for the time being??

Any info would be great!
#&gt&gt&gt&gt #>>>> #based #business #internet #structure

  • Profile picture of the author JennSpencerIM
    JennSpencerIM
    I would talk to an accountant that can specifically help you out so you can get the right answer for your situation. We did that and have been happy with what he set-up and it was much more than just one thing that we needed done. So definitely consult with a specialist in this field because its suuuuuper important for taxes, etc!
  • Profile picture of the author Tymarkinc
    Tymarkinc
    I would have to give a disclaimer and say that I am not giving you professional or legal advice. However, my business is structured as an LLC. It's less expensive and less strict(in regards to paperwork) than a corporation.
  • Profile picture of the author Gclunis
    Gclunis
    When you made the decision to become a legitimate business...does it cost anything to register it federally or state wide and get the EIN and all of that? I ask because at some point I am going to have to do this and I don't know if I will need to put away money to have it done or what...

    get back to me

    Gregg
  • Profile picture of the author RyanLima
    RyanLima
    Originally Posted by Gclunis View Post
    When you made the decision to become a legitimate business...does it cost anything to register it federally or state wide and get the EIN and all of that? I ask because at some point I am going to have to do this and I don't know if I will need to put away money to have it done or what...

    get back to me

    Gregg
    The EIN is Free and you can apply for one at irs.gov whatever state your in.

    As far as registering your biz with the state its 20 - 25 bucks at you local city hall.

    Getting you business structures is more expensive though. LLCs can cost $ 500 and I think Incorporation is around $ 200.

    Im thinking LLC at this point but I will find an accountant to discuss it with before I make a final decision.
  • Profile picture of the author Gclunis
    Gclunis
    If it's a one man person do you have to do LLC or INC? can't u just leave it at registered?
  • Profile picture of the author RyanLima
    RyanLima
    I would have to give a disclaimer and say that I am not giving you professional or legal advice. However, Ive read that for tax purposes and banking its best to operate as a different entity.
  • Profile picture of the author Gclunis
    Gclunis
    ahh i see, alright thanks for the advice
  • Profile picture of the author Kevin_Hutto
    Kevin_Hutto
    Here are the general ideas... A single member LLC is a pass through entity that is invisible on your tax returns and offers liability protection but has no real tax benefits unless it is set up to be taxed as an s-corp (but you wouldnt really want to do that unless you like filing double paperwork). An LLC is great for partnerships as it can pass income straight through to the partners tax returns or their respective corporation's tax returns - keeps it simple for the partners.

    Most people elect to incorporate as an S-corp as it has liability protection as well as a tax benefit. The liability protection is the same. However, in an s-corp, you can pay yourself a salary and take distributions for the rest of the profits of the company. The reason that this is important is that you only have to pay FICA(15.3%) on the salaried amount.

    So, for example...

    If you are a sole proprietor and make $100,000 profit... Then you will have to pay FICA on the full amount... Which would equal $15,300 in taxes.

    If you were an S-corp and paid yourself a salary of say $50k... Then you would have to pay FICA on the $50k salary but not on the distribution of the other $50k. So your FICA tax burden would be $7650... So you would have savings of $7650 in taxes.

    Couple of caveats... First, you have to pay the other applicable taxes on the full amounts. Second, many fall into the trap of paying themselves a super small salary like $10k to save the max... This can often raise red flags. What the IRS looks for is a salary that is "reasonable and customary" for the position/job that you have. So, usually, somewhere in the 35%-50% range is a good rule of thumb.

    And, after saying all of this... I am not an accountant or a tax attorney. Just a businessman. So you should consult a tax attorney.
  • Profile picture of the author DogScout
    DogScout
    LLC liability protection for single owned LLCs has been ignored by judges in every state in the US except for Nevada as of late last year. An off shore blind trust is the safest if you intend to need protection, (St Kitts or Nevis are good ones) although business insurance is cheaper and cleaner.
    In spite of that I have a dual LLC and register DBAs to do business under.
  • Profile picture of the author Tymarkinc
    Tymarkinc
    Originally Posted by Kevin_Hutto View Post
    Here are the general ideas... A single member LLC is a pass through entity that is invisible on your tax returns and offers liability protection but has no real tax benefits unless it is set up to be taxed as an s-corp (but you wouldnt really want to do that unless you like filing double paperwork). An LLC is great for partnerships as it can pass income straight through to the partners tax returns or their respective corporation's tax returns - keeps it simple for the partners.

    Most people elect to incorporate as an S-corp as it has liability protection as well as a tax benefit. The liability protection is the same. However, in an s-corp, you can pay yourself a salary and take distributions for the rest of the profits of the company. The reason that this is important is that you only have to pay FICA(15.3%) on the salaried amount.

    So, for example...

    If you are a sole proprietor and make $100,000 profit... Then you will have to pay FICA on the full amount... Which would equal $15,300 in taxes.

    If you were an S-corp and paid yourself a salary of say $50k... Then you would have to pay FICA on the $50k salary but not on the distribution of the other $50k. So your FICA tax burden would be $7650... So you would have savings of $7650 in taxes.

    Couple of caveats... First, you have to pay the other applicable taxes on the full amounts. Second, many fall into the trap of paying themselves a super small salary like $10k to save the max... This can often raise red flags. What the IRS looks for is a salary that is "reasonable and customary" for the position/job that you have. So, usually, somewhere in the 35%-50% range is a good rule of thumb.

    And, after saying all of this... I am not an accountant or a tax attorney. Just a businessman. So you should consult a tax attorney.
    What he said...

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