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How much are you setting aside (for taxes)?

Discussion in 'Business & Tax Advice' started by RichUser, Jun 1, 2009.

  1. RichUser

    RichUser Regular Member

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    This question is geared towards CL marketers that are making decent coin. How much of your revenue are you setting aside for taxes? Do you have a corporation, what type? Did you incorporate in your state, or in Nevada/Delaware?

    Thanks!
     
  2. dloader22

    dloader22 Junior Member

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    I did a lot of asking around before incorporating and what not. I talked to tax advisers and so on.

    Regarding nevada/delware - You can incorporate there but the tax benefits are only worth it if you are really bring in a shit load of money 250k+ a year. Otherwise the hassle of it and the trouble that could come from it isn't worth it unlesss you obviously live in nevada or delaware. Basically the IRS has been busting down on people who've been incorporating out of state and charging them all kinds of back taxes that can date up to 2-3 years. Of course all those online websites that say "incorporate in nevada" wont say that but that's what the tax advisors told me. Who knows maybbbe they are liars too, but anyway i incorporated in my own state.

    Regarding incorporation structure, this is a straightforward answer, and you can't go wrong with the following setup. Incorporate as LLC but indicate "S Corp" tax filing structure. LLC is less paper work and hassle and lets you file your taxes in different ways. "S Corp" taxation allows you to take half of your income and write it off as dividends and only have to pay "income tax on it" instead of "income tax + 15% self employment tax" which is what regular sole proprieter (someone not incorporated ) or regular LLC has to pay according to law.

    I hope this helps, i'm not expert, so obviously do your own research, but hopefully this will help you get started.
     
  3. loclhero

    loclhero Supreme Member

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    Sole proprietor here, file schedule c and set aside 40% of all earnings without fail. Which of course leaves me some really, really nice cash at the end of the year still sitting in my account(s)
     
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  4. loclhero

    loclhero Supreme Member

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    Maybe I'll get some advice from a tax pro on what you're saying here. I'm doing exactly what you said a sole prop does but if I'm losing out....???
     
  5. MrE

    MrE Executive VIP Jr. VIP Premium Member

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    Go talk to a high end tax adviser and a lawyer specializing in corporations, this is money well spent. You will regret not doing it when tax time rolls around and you are paying much more than you should have been.

    There are some great tax benefits as well as eliminating personal risk associated with business activities.
     
  6. dloader22

    dloader22 Junior Member

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    Yeh schedule C is sole proprietor. My understanding is that you have to pay 15% self employment tax + Income tax on 100% of your income. With LLC that files tax as "S Corp", you can set a reasonable amount of your income as "dividends" (reasonable usually being around 50%) and only have to pay income tax on those. So the savings aren't huge but it might help.
     
  7. dloader22

    dloader22 Junior Member

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    I agree, talking to a tax adviser for half an hour will answer all your questions pretty quickly. Also this goes without saying but until you talk to one you should keep physical copies of all your business expenses (receipts) and keep record of all income (checks you're depositing in bank account), so you can write off expenses at end of year.
     
  8. RichUser

    RichUser Regular Member

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    $250k+ annually is not a problem for me. What I don't quite understand though is with dividends, if I am the only shareholder, that means that all the 50% will be given to me right? But, what if people buy shares in my company, I will have to start splitting my money to them also? But I have control over how much dividends I distribute to each shareholder right? For the money I receive from dividends, will I still have to pay Federal Income Tax? For the money that says with the corporation, will it gets taxed at 15.3%?

    I am currently setting aside 30% of my total earnings.

    Yes, I plan on doing so, but just want to get a feel for what I should be asking and so on.

    I'm pretty sure that you only pay the self employment tax and state l income tax of your net earnings.

    So if I give myself $100,000 as dividends, I will have to pay only state tax on $50,000, and then federal income tax + state tax + unemployment tax on the other $50,000?

    What about the "wage" I would pay myself. Would then be taxed as regularly also? How about the money that remains with the corporation?
     
  9. playercool

    playercool Junior Member

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    Let me first say go find yourself a good accountant.

    Yes it might cost you a few hundred dollars...hell even upwards of 1k for the year if he does your taxes as well...but it is WORTH it.

    You will want to get yourself an LLC. Then you need to tell the Government that you want that LLC taxed as an S corp. I can't remember the document number is called but you fill it out and mail it in. You will want to do this ASAP. It is extremely important and will save you assloads of money.

    The next step you want to do is each month have your LLC cut you a check for 1000 a month or so. Now you are an employee of the company and receive a check. You will have to pay your regular taxes and SS and medicare taxes on this about 15%. But who gives a shit since it is only on 12k a year.

    Now on the rest of the cash you make you will want to take that as a DISTRIBUTION <------ Yes that word specifically. You can take it each month or every quarter or once a year it doesn't matter(Make the distributions different amounts though otherwise the government might say it looks like a salary). The beauty of this is that you only have to pay regular ordinary income tax on it. It is freaking genious and if you are reallying making 6 figures it is going to save you bundles of loot.

    But seriously go find yourself a good accountant who knows his shit. You will thank yourself.
     
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  10. Botwiz

    Botwiz Executive VIP Jr. VIP

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    What about taking your money off shore? There has to be a way to get paid out via bank wire to an off shore account. I have pondered this my self RU and I think playercool is the best approach to saving tremendous amounts of cash to the BIG MAN. This is similar to one of my old bosses approaches putting all employees on a 1099 (sub contractor) and then sending himself a monthly check of lets say 5%-10% of the gross for a minimal salary. This way the taxes your (he was) paying are minimal in comparison if you took any other approach.

    "THE BEAUTY OF DISTRIBUTION"
     
  11. RichUser

    RichUser Regular Member

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    When you say "only have to pay regular ordinary income state", do you mean I will only pay Federal Income Tax? No State or Unemployment tax?

    Too risky. I would much rather me a couple ten-thousands poorer, then risk being in jail for a decade.

    So really, with an S CORP, the only part that you can reduce taxable income is with Unemployment Tax, right?
     
  12. Essential Clix

    Essential Clix Executive VIP Premium Member

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    Moving this to the Business & Tax Advice section.
     
  13. LazyAffiliate

    LazyAffiliate BANNED BANNED

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    In my native country i'm not liable for income tax when i stay abroad for atleast 6 months of the year (i spend more then 10 months abroad).

    But a US citizen is always liable for US taxes no matter where you live.

    It's gotta suck to be a American :D

    Lazy
     
  14. tommysc

    tommysc Senior Member

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    I just got my little LLC up and running about 2 weeks ago.

    I was previously running significant money without any entity... just a 1099 and whatnot, so the LLC is a definite advantage.

    Now I just need find a solid BlackHat Accountant now, and I'll be set. ;).

    -
     
    Last edited: Jun 1, 2009
  15. thowell

    thowell Newbie Premium Member

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    As a tax accountant and a slightly blackhat marketer, I can say that the LLC with S-Status is probably the best for most marketers but the C-Corp status would allow you to super fund retirement accounts tax-free. This could be huge savings for some marketers. I always suggest you consult with an accountant in case state or federal laws have changed.

    Maybe there is an e-book on this in my future??????
     
  16. ifwearner

    ifwearner Regular Member

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    I'm setup in my state as a regular S-Corp. I pay myself a salary, out of which 1k/mo is set aside for income taxes. I write off anything that can be claimed as a business expense. I take distributions of cash whenever I need them and SE tax is not imposed on any of that. Of course I have an accountant to keep it all together come tax time. I also put away 11.5k/year for SIRA fund since it is the highest tax-deductible and tax-free growth retirement plan. (I think) Anything else I owe comes out of my account at tax time.. since I don't blow through my cash like a rockstar. (usually)
     
  17. innocent

    innocent Junior Member

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    I have an S-Corp and draw 60% as salary and the balance as distributions. Since I also have a "day job" I don't withhold anything additional for taxes as my regular job and my S-Corp salary has enough withheld.
     
  18. Thaithai

    Thaithai BANNED BANNED

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    What if I operate a LLC or IBC in Delaware, USA.
    I am myself european, 50% income tax
    Do you think it is a good idea to get paid directly from my affiliate company to my offshore Delaware company, avoid high taxes and other fees
    The law incists non-residents of Delaware not to be american to operate a company, right?
    on the other hand, this is completely legal because all the work is done on the Internet, and can be done everywhere

    and what about other countrys where you can easily create an offshore company like Panama or Seychelles?
    To choose between an offshore company with 0 tax, Panama, Seychelles or USA, Delaware then I would go for a USA Delaware offshore company, am I right or is there a better choice?
     
    Last edited: Jun 2, 2009