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Becoming a "business"

by Adrianhenry
16 replies
So everyone pipes on about how you should treat any IM venture as a business which is perfectly logical and solid advice to anyone getting involved but it is when you dig slightly deeper into this advice that I get stuck for answers. When you start to think about it literally rather than just a state of psychology to live in that will find you most success..

So how far do any of you who have been doing this for a while or who have significant turnover take this? I mean do you register a business officially? Have separate bank accounts / paypal accounts? Do you incorporate or any other methods to protect yourself and your money?

I mean right now I'm not making nearly enough to justify any of this so I still use my personal accounts and personal paypal etc although I feel that long term this cannot be correct and there are probably a lot more things that should be done to protect yourself and your business.

I have never seen any of this sort of stuff discussed here and I would love to hear some warriors opinions on all of this.
#business
  • Profile picture of the author Brent Stangel
    Have separate bank accounts / paypal accounts?
    Oh yes!

    You gotta keep the tax man happy.
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  • Profile picture of the author DWolfe
    [QUOTE=Adrianhenry;9704206
    I have never seen any of this sort of stuff discussed here and I would love to hear some warriors opinions on all of this.[/QUOTE]

    Seeing that you are located in the UK I would not listen to half the advice here. Since a large majority here are from the US the tax and business laws would not be the same. I would highly recommend seeking out the help of a legal expert in your country. Not opinions from people on this forum who may not have a clue of what they are talking about.

    You should start to keep good records of all money earn and any expenses. A easy way to start is to put any IM money into a different bank account than a personal account. Pay your bills with money from the same account. Than talk to your account if you have one.
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    • Profile picture of the author Adrianhenry
      Originally Posted by DWolfe View Post

      Seeing that you are located in the UK I would not listen to half the advice here. Since a large majority here are from the US the tax and business laws would not be the same. I would highly recommend seeking out the help of a legal expert in your country. Not opinions from people on this forum who may not have a clue of what they are talking about.

      You should start to keep good records of all money earn and any expenses. A easy way to start is to put any IM money into a different bank account than a personal account. Pay your bills with money from the same account. Than talk to your account if you have one.
      Yes I understand that tax laws are different and most people here live outside of the UK. I was just wondering what everyone does. That does not mean I am going to follow what is said, but it will provide me an insight into the correct path that should be followed which I can then move towards and seek correct information from the people that do know the UK specifics.

      Thanks for the reply
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  • Profile picture of the author JakeStatler
    I use my paypal account for all of my businesses for tax exemption tracking. But, I transfer my money out into my main bank account and then distribute my earnings to different accounts. 30% for taxes and 50% for reinvestment / advertising costs.

    You're right on the money my friend, you have to treat this like a real business.. because it IS a real business. You won't be successful if you treat this thing like a hobby. You have to have a business plan and follow it, just like a regular physical business.
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    • Profile picture of the author Adrianhenry
      Originally Posted by JakeStatler View Post

      I use my paypal account for all of my businesses for tax exemption tracking. But, I transfer my money out into my main bank account and then distribute my earnings to different accounts. 30% for taxes and 50% for reinvestment / advertising costs.

      You're right on the money my friend, you have to treat this like a real business.. because it IS a real business. You won't be successful if you treat this thing like a hobby. You have to have a business plan and follow it, just like a regular physical business.
      This is kind of what the issue is for me. I am tempted to do it the way that you are doing it but part of me feels that it isnt the best way to do it. I don't know why I feel like that but there is something nagging in the back of my mind.
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      • Profile picture of the author Nightengale
        Originally Posted by Adrianhenry View Post

        This is kind of what the issue is for me. I am tempted to do it the way that you are doing it but part of me feels that it isnt the best way to do it. I don't know why I feel like that but there is something nagging in the back of my mind.
        Frankly, what you think or feel is completely irrelevant. Business is exactly that: business. It's NOT personal. It's merely mechanics.

        First, you need to treat your business like a business. At a minimum, you need a separate bank account for your business activities.

        As far as your entity structure, that depends on your business, English legal and business requirements and your personal situation. I'm in the U.S. and have absolutely no knowledge or experience with English business requirements or law. But I imagine you all have something similar to what we have:

        Here in the U.S., you can register your business as:

        1. Sole proprietorship (or "doing business as") where you do business under your own name or a business name.

        This is the simplest way to do it, but you assume personal liability for all business debts and liabilities.

        2. Limited liability company

        This offers more protection and limits your business liabilities and debts to the business while protecting your personal assets.

        3. Partnership

        4. An "S" or "C" corporation

        Each structure has it's own pros and cons, it's own legal and tax requirements. I'm NOT a lawyer and the above is only as I understand it.

        Do NOT make your decisions based on what you find here on this forum!

        You need to find a reputable source of knowledge and help for your country. Here in the U.S., we have things like LegalZoom, Nolo law publishers and Leverage-A-Lawyer.com for help with education and creation of our entity structure. Look for similar resources for English businesses. Do a Google search, ask people in your country who have actually created companies.

        I imagine you also must have low-cost help for entrepreneurs in England. It's just a matter of finding it.

        Do your research and go into it with your eyes wide open. Choose an entity structure that makes the most sense for your situation. Keep separate bank accounts and separate records. It doesn't need to be complicated at all. But separate records are crucial.

        Hope that helps!

        Michelle
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  • Profile picture of the author NeedBucksNow
    Good post. That did get me thinking when you said the part about actually treating your online business just the same as you would a small business though. That is an easy thing to say but when you actually start to treat it that way, I'm sure it makes a BIG difference in how you approach getting sales etc. I guess you really just have to take the time to learn what works & work at it everyday. Just like you would if it really was your only source of income & your life truly depended on "making it".
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  • Profile picture of the author Frank Donovan
    Originally Posted by Adrianhenry View Post

    So how far do any of you who have been doing this for a while or who have significant turnover take this? I mean do you register a business officially? Have separate bank accounts / paypal accounts? Do you incorporate or any other methods to protect yourself and your money?
    I don't know your employment situation, but generally, you should register as self-employed. As far as a business is concerned, you can class yourself as a sole trader (or a partnership), or you can register as a limited company. Each has its own advantages and requirements so you should discuss the matter with a professional. But definitely open a PayPal business account. A personal account is far too limiting for anyone making a significant number of transactions.

    A business bank account is useful, in that it keeps all your business transactions separate for accounting and tax purposes, but isn't absolutely essential in the early days - although I would recommend it.


    Frank
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    • Profile picture of the author DWolfe
      This is from the offline world and applies to my area of the US first you have to file with the State of NJ NJ Division of Taxation - Starting a Business in NJ This link tells what to do if you are starting a business. Also you will need to get a Tax ID # from the I.R.S.

      You can decided if you want to be a Sole Proprietor, form a partnership, LLC or a corporation. There are advantages and disadvantages to each. These are legal ways to form a business for protection.

      Once you have a tax ID # and proof you are a business (articles of incorporation) you can head to your local bank and open up a Business Checking account. Once you have this all set up you can have a business paypal account set up and deposit all business earnings into the checking account..

      Hopefully this helps.
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      • Profile picture of the author Frank Donovan
        Originally Posted by DWolfe View Post

        This is from the offline world and applies to my area of the US first you have to file with the State of NJ NJ Division of Taxation - Starting a Business in NJ This link tells what to do if you are starting a business. Also you will need to get a Tax ID # from the I.R.S.

        You can decided if you want to be a Sole Proprietor, form a partnership, LLC or a corporation. There are advantages and disadvantages to each. These are legal ways to form a business for protection. .
        He's in the UK.


        .
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        • Profile picture of the author DWolfe
          Originally Posted by Frank Donovan View Post

          He's in the UK.


          .
          See Post 3&6
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  • Profile picture of the author Adrianhenry
    Another question I have is:

    Assume you have several blogs in different niches and multiple seperate streams of income. Is it still advisable to use the same business paypal account for all of it?
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  • Profile picture of the author treyton
    I tend to think you actually become "a real business" when you start to hire people. Up until that moment you can run on your personal account and such, but when the headcount grows beyond your own, then you need true separation between you and "the business", if only for tax purposes. Up until that moment, the venture is more an experiment: does this operation work or not, does the market respond, etc.
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    • Profile picture of the author bit twiddler
      Originally Posted by treyton View Post

      I tend to think you actually become "a real business" when you start to hire people. Up until that moment you can run on your personal account and such, but when the headcount grows beyond your own, then you need true separation between you and "the business", if only for tax purposes. Up until that moment, the venture is more an experiment: does this operation work or not, does the market respond, etc.
      This is incorrect. The first and most important aspect of forming a company to represent your business activities is that it eliminates personal liabilities from the activities of the business. Secondly, it helps to legitimize the business you do, as well it offers some tax exemptions and some reduced taxation's.

      I have had dozens of corporations and not once in my 43 years as a businessman had an attorney or accountant recommended or tried to justify operating my businesses as an individual. It's insane to do that.
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      • Profile picture of the author Adrianhenry
        Originally Posted by bit twiddler View Post

        This is incorrect. The first and most important aspect of forming a company to represent your business activities is that it eliminates personal liabilities from the activities of the business. Secondly, it helps to legitimize the business you do, as well it offers some tax exemptions and some reduced taxation's.

        I have had dozens of corporations and not once in my 43 years as a businessman had an attorney or accountant recommended or tried to justify operating my businesses as an individual. It's insane to do that.
        This is the sort of answer I am looking for. In the UK is it better to register as a sole trader or to register as a limited company?
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        • Profile picture of the author bit twiddler
          Originally Posted by Adrianhenry View Post

          This is the sort of answer I am looking for. In the UK is it better to register as a sole trader or to register as a limited company?
          I wish I knew, I am in the states and don't have the UK requirements in my library. There are many from the UK in the forum and I bet that one of them can be found easily enough.
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