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Guidance on online business taxes Etc.

Discussion in 'Business & Tax Advice' started by Monica.T1976, Dec 27, 2016.

  1. Monica.T1976

    Monica.T1976 Newbie

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    Hello black hat world! I hope everyone had a great Holiday:) I was hoping for some guidance on my online business I really have grown over the last 3 years before the start of the New Years! For the last 3 years I have been full time doing a desk job making a decent salary of 50K a year. I worked very hard to achieve a 6 figures a year gross business online which took me 3 years to meet my goals to finally give up my full time job last month to focus and grow my business.

    For the last 3 years I been adding my online income to my W2's from my full time job. I would like to now register my business. I would appreciate if some of you experienced entrepreneurs would give me guidance. I know I probably should see an account or lawyer but would like to know some basics before going:

    - I'm married with 1 kid... what gives better tax breaks? Forming a LLC, S-Corp Etc.

    - I have 401K and stocks at my past job... is there any benefits being self employed to continue my investments for my retirement/daughters college fund? Any recommendations?

    - Do I need a lawyer running a business at this level? if so what kind?

    - Do I need a business credit card/business checking? Most of my money is in PP... should I withdraw the funds to a business checking?

    - I live in Vermont what self employed taxes should I expect to pay?

    Any advice on the steps I should start with and end with would be great! For you guys living the dream what do you like being an entrepreneur? Better tax breaks, write offs, freedom etc,

    I wish you all luck heading into 2017 and hope all your dreams come true... mine is coming a reality for all the hard work I did for the past 3 years!

    God bless
     
  2. toml3030

    toml3030 Elite Member

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    Depends on your situation, but straight tax liability wise if everything else is the same in general S corp gives you slightly less net cash if you make let's say $50-100K a year but if it gets into millions S corps give you more flexibility.

    Depends on what your setup is. It may be better to leave it alone or roll it over.

    You need a competent accountant a lot more than a lawyer. Stuff like incorporation and setting up a business you can do without a lawyer.

    You will pretty much have to do this since if you form a LLC or S corp. your business funds have to be totally separated from your personal funds. Any co-mingling of funds leads you to tax liabilities as well as losing the legal protection of a corporation.
     
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  3. RuthSam

    RuthSam Jr. VIP Jr. VIP Premium Member

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    You want to consult a CPA in your area to get professional advise. BHW is a great forum and respect for all the people here but it is not the place to get real and professional tax planning advise :)
     
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  4. Monica.T1976

    Monica.T1976 Newbie

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    I understand what you're saying. Some people in this forum I think I can trust with their opinions. Yes, I most likely will see an accountant the first of the year. I would love to use a software to do it myself and pay quarterly taxes. What should I bring to the accountant? I'm sure they do, but I feel like they don't really do online businesses that much. I would hate to get an accountant and they take my money and screw things up. Do people run 6 figure business and just pay their taxes at the end of the year like a regular job or is that stupid?
     
  5. toml3030

    toml3030 Elite Member

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    Generally what I advise you to do is to pay for an hour of accountant's time and ask for advice on what is the best setup for your specific situation. After the talk the accountant will probably ask to you put him on monthly retainer. Mine charges $250/mo retainer plus $800 to file taxes for a 10 person manufacturing, wholesale, and drop shipping operation. You can do it with Quickbooks and Turbotax yourself for a fraction of that.

    Yes. The retail online sales stuff I run is run as a separate business that I don't use accountants for, and it has about $600K in sales. Actually online stuff is easier to keep track and pay taxes for than a brick and mortar store, since all records are kept electronically.
     
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  6. Monica.T1976

    Monica.T1976 Newbie

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    Thanks so much for the advice. So for this year I can just add my online income to my regular job W2's and still deduct business expenses I paid for? Let say I decide I want to keep track of my own taxes using quickbooks self employed. I will be the only one operating my business and will probably gross 100K a year. In your opinion should I form a LLC, S corp or just keep being a sole proprieties and pay taxes at the end of the year? Great business you have:)
     
  7. toml3030

    toml3030 Elite Member

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    Yes, I use Turbo Tax or the online business and I haven't had issues with the taxes. You can form a corporation and pay yourself a dividend + wages to save some taxes but since maintaining a corporation costs money, unless you're talking bout big money, the tax differences should not be huge. Also corporations have lower tax rates but you must pay tax on all profits instead of what you take out of the business it sorts of evens out. I had a year where my inventory grew by like $150K but I didn't take any money out of the business but i got hit with a $20K tax bill since increased inventory technically was profit. The main thing with corporations is that you can't be held personally liable for actions of the corporations and you can't be sued for the assets of the corporations for your personal actions. But in general if you do not have investors or partners and run everything by yourself, most people should not have to incorporate since liability insurance is cheap. You can purchase $2m liability insurance for $500/year.
     
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  8. Monica.T1976

    Monica.T1976 Newbie

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    Thanks again Tom! Just a few more questions if you don't mind.

    I think the easiest thing for me to do is register my business as a LLC. It will be just me running the business and it will generate about 100K-150K in gross sales a year. I'm not going to use an accountant and use quicken books to keep track of my business and export it to turbo tax quarterly.

    - Can I pay myself a weekly, Bi-weekly, monthly salary from my business? Can I deposit lets say $500 a week in to my personal checking to pay bills, rent, etc.? How do I know what taxes I pay out of the $500... will quicken books do it automatically?

    - Is it possible to get money back running a business if I have a loss for that quarter?

    - What happens if I have to pay my quarter taxes and can't give that lump sum that quarter?

    - What usually sets off an audit?

    - I keep my business money in PayPal... should I put that money in a business checking instead?

    Thank you!!
     
  9. WUupTS

    WUupTS Newbie

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    I highly recommend getting a competent accountant that focuses on businesses. After a year or so, you can see the filing and understand the filing process. After understanding your books and taxes, you may opt for doing it on your own. First and foremost, "invest" in an accountant first to make sure you have all your bases covered. This is what I personally did.
    Also, congratulations on your success and here's to another profitable new year!
     
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  10. Sombrero

    Sombrero Senior Member

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    You saying I'm not real?! :(
     
  11. toml3030

    toml3030 Elite Member

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    You pay yourself a fixed salary from the corporation just like an employee. You can't just transfer money.

    Finances have to be completely separate. You can't take money of the corporation whenever you need cash.

    You shouldn't have to pay taxes on income by quarter. Sales tax and taxes on wages have to be paid on time.

    Super aggressive writeoffs and bad luck.

    Shouldn't really matter if paypal is secure. For security reasons I don't log into any financial account from wifi, only hard wired internet.
     
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  12. Monica.T1976

    Monica.T1976 Newbie

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    I agree. I just don't trust accountants and I operate my own online business with my own brand products. I guess I'm paranoid. When I check accountants near my area they all have no reviews or satisfactory reviews. Some of them have side business selling products themselves. They could see my product and profits and copy themselves to make a nice side income.
     
  13. WUupTS

    WUupTS Newbie

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    I've made a few LLC and S-Corp. LLC will require more money upfront, but at your revenue level, it fits the bill. As stated earlier by another member, S-Corp will benefit GREATLY with higher revenue and expenses.

    Always, always, always have a business checking account. Never mingle your personal and business for liability and tax concerns. Plus, your accounting will be very easy to do if everything is separated properly. Have a separate business credit card to build up credit and manage your expenses easily. Doing your taxes will be a breeze.

    401k + stocks: roll them over to an IRA or Roth IRA. Most if not all brokerages offer them.
     
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  14. WUupTS

    WUupTS Newbie

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    Avoid home-based accountants if possible. I highly doubt they will get into eCommerce; the busier they are, the less time they will have doing other business outside of their profession.
     
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  15. Monica.T1976

    Monica.T1976 Newbie

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    I sound stupid but when can I withdraw that money from Paypal... only business expenses?

    Thank you!
     
  16. WUupTS

    WUupTS Newbie

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    As long as you paid your taxes on it (PP account), you may do whatever you want with it. Consider it "seed" money for your new business LLC/S-Corp and you can expense that as well.
     
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  17. Monica.T1976

    Monica.T1976 Newbie

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    Thank you! Do S-Corp save you taxes more then LLC? I'm trying to figure out how do I take money from my business (my only income) for my cost of living without getting in trouble. I know you have to keep personal and business separate but I have to live.
     
  18. Lauriat

    Lauriat Power Member

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    Listen to this man.
     
  19. WUupTS

    WUupTS Newbie

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    You will be basically receiving a paycheck from your LLC/S-Corp every week/bi-weekly. S-Corp will save you on tax if you generate more revenue and have lots of expenses.
     
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  20. WUupTS

    WUupTS Newbie

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    Try to schedule a consulting session with a CPA and have these questions handy. I'm pretty certain they will not charge you a consulting fee.