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Basic Business Advice

Discussion in 'Business & Tax Advice' started by bizcredit, Jul 23, 2008.

  1. bizcredit

    bizcredit Power Member

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    You need to form a corporation. Why? Because it makes things much simpler. Put all sponsor earnings in your corporate bank account. Take ALL business expenses out of your business account, with debit card or check. Pay yourself from your business account. Just write a check, and technically be a consultant to your company, not an "employee" which requires all kinds of paperwork and employment taxes for the company.

    In most states its under $200 to setup a corporation or LLC.
    Then you go over to IRS website get your tax id number. Now, at the end of the year when you do taxes, you have to do corporate taxes, and personal taxes. But its very easy, because any business account deductions are business expenses, and deposits are income. If you are smart, you pay yourself or invest the rest of the profits and company has 0 income taxes.
    Now you pay personal income taxes, but guess what? as a consultant to your company you are self employed. Its easy to keep track of your income, since its coming from your company, not 1000 affiliate companies. So this saves you a ton of paperwork.

    Any portion of your home used only as an office, you can calculate what percentage that equals in rent, utilities, and deduct that. You can also deduct your cell phone as its required for your self employment. You can deduct internet connection costs in your home as required to your consulting.



    Thats just a beginner course.
     
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  2. scubaslick

    scubaslick Regular Member

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    Yes, but I enjoy that pasty, sweaty, twitchy thing my accountant does when I tell him I've sent yet another 1099 out to a network and decided that my official uniform is made up of fishnet stockings, high heel mucklucks, a sterling silver bustier, an X-Men thong and ear rings made of baby seal skulls and need to be written off.

    I don't want simple. I want fun. :)
     
  3. edc

    edc Regular Member

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    Yeah, but you'd still screwed, since you took the cash out of the corporation, you are going to get taxed on it (EDIT - at the personal rate) with the 15% self employment tax to boot. If you use a corporation this way I'm not sure that it does much to help your cause. You're better off leaving the money in the corporation and having it pay for your health insurance, pension, your 'corporate' 911, etc. Your base tax rate in the corporation is 15% - better than your personal rate, even with deductions.

    If you are making enough $$ to matter, don't be a cheap bastard - hire a competent CPA and/or attorney.

    My apologies if that came off as a flame - just a humble (and somewhat bitter) opinion. -e-
     
  4. bizcredit

    bizcredit Power Member

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    Well in many cases, the 15% self employment tax is more than made up with self employment deductions. I deduct my homes interest, $12k+ a year, PLUS the 15% or so of my mortgage payments another few grand a year, and then 15% of utilities, 100% of phone, cell phone, internet, and postage, any bank fees, PLUS mileage on my car for business trips, any hotels i stay in for business (i gotta have a net connection while traveling right or i cant work?), and on and on, my income drops tens of thousands with all the legal deductions. My account does my taxes.
     
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  5. edc

    edc Regular Member

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    Agreed on all counts, but you have jumped through a bunch of hoops to set up the corporation, and unless you are doing it for liability reasons, it is probably unnecessary. If you set up the corporation and leave the money there, it can own your cars, provide you with fully tax deductible health insurance, provide a pension plan. If you're careful, you can make it so that even if you pull little or no cash from the corporation, it can provide you with a lot of benefits that you're currently pulling our of your wallet. If you are writing off expenses (ad spend, etc) from the corporation, and writing off your home office, incl phone, mortgage (small writeoff if you're already taking an interest deduction), etc, you may be jumping through more hoops that its worth.

    Of course, that's just my semi-educated opinion. No business approach is right for everyone. The best piece of all around advice is not to be a cheapskate and hire an good attorney or accountant whwn (or before) you need one.

    -e-

    BTW - Let me add that if you're thinking of this then you're probably doing pretty well - very cool. I just wanted to put in my two cents to get the dialogue going. I'm surprised that more people haven't chimed in.
     
  6. Atlas

    Atlas Regular Member

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    I have had a sole proprietor and an LLC in the past. My advice is to not get any kind of biz license until you are actually generating income. I registered business license for businesses that i lost interest in and decide to pursue other things. I wasted time and money creating an LLC. Make over 10k+ then worry about getting incorporated. I have been told this by people who worked for the state i was getting a license in, they basically said you dont really need a license if you're not making more than 10k.
     
  7. vapid2323

    vapid2323 Newbie

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    This is mostly over my head but keep talking! Being that I am quite new to this its very good information.
     
  8. nomorealarmclock

    nomorealarmclock Newbie

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    I agree with vapid2323. This is FANTASTIC info!!! Are there any webinars or tax classes for home business owners out there?

    I'm sure there's SO much to learn!
     
  9. caretaker2007

    caretaker2007 Power Member

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    It also depends on how you plan on making the money. If you want to sign up for CPA networks incorporating is a good idea to do from the get go. A big reason is that it keeps your social security number out of the loop and places all the income burden on the corporation. While this would seem to scare some people keeping the financials in order is not that hard, you just have to do it.

    If you are going in to the adult business you may want to incorproate before starting to keep your name off of the paperwork. You may live in an area that people would deal with you differently if you are doing porn online, your church my ex-communicate you, and that sort of stuff.

    Not all business entities need a license to operate, it varies by state and by business purpose.

    Prices also vary wildly between states, some are really low and others, like mine, are stupidly high.

    The state you form your business in has to be considered, for taxation a few are at 0% and others creep up to about 10%. You would need to gauge your registered agent fees against your local area and states taxation.

    Also consider your annual filing fees for your business enitity and include them with the taxation and Registered Agent fees.

    Consider personal liability for a LLC or sole proprietorship as oppsed to it being minimized, or negated, if you are working for a corporation that you happen to own.

    There is a lot to consider when incorporating, fees, taxes, federal, state, and local requirements, and purpose. Does your name appear on any, or all, of the records? What does the service you may be considering offer, what hidden fees are there, and what do they do for you after the sale?