Taxes once you make money?

So I'm finally after 3 months making some good money (about $350 a day at the moment) and was wondering what to do about taxes? I heard LLC is the way to go. What do you guys write off? I can imagine you lose a huge chunk to Uncle Sam... or Queen Elizabeth... or well... you get the picture.

I'm on the same boat as you, from what ive heard you can either go with an LLC or an S Corporation. I believe with an S corporation you can pay yourself with a dividend so that your company would have no profit/loss for that year, so you would only be paying the income tax on your dividend. I just started reading up on this a couple days ago, so im no expert, but from what ive read, it really depends on the state you are forming your business in. But in either case, you really don't want to be paying self-employment tax (without a company). Then you could be paying around 40%.

I am also thinking about forming an LLC or something, both of my parents went to law school so I am going to get them to help me out and figure out what to do.

mad hatter said:

I'm on the same boat as you, from what ive heard you can either go with an LLC or an S Corporation. I believe with an S corporation you can pay yourself with a dividend so that your company would have no profit/loss for that year, so you would only be paying the income tax on your dividend. I just started reading up on this a couple days ago, so im no expert, but from what ive read, it really depends on the state you are forming your business in. But in either case, you really don't want to be paying self-employment tax (without a company). Then you could be paying around 40%.

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I consulted a CPA when I started making decent coin- I had a C-Corp setup last year and just started making enough $ in April to switch my operation to the corp. I was in luck and got to speak with both partners of the firm, unfortunately I just tried pot-brownies about 10 hours prior and was still quite hazy for the meeting but this is the jist of what I took away from it and I hope it helps.

Unless you're building a big company where you plan to have over 99 shareholders you wanna switch your C-Corp to an S-Corp. With a C-Corp you experience double taxation for earnings/dividends.

With an S-Corp you have to pay yourself a decent salary- with just starting a new S-Corp this could be a relatively small amount for the first year. I have my payroll setup automatically to take payroll taxes+some withholding for distributions. A distribution is kind of like a dividend but it is taxed at your ordinary income rate rather than a capital gains rate (the C-Corp is taxed on the money before it goes as a dividend anyhow.) So basically with an S-Corp you can still write off most of the stuff you can with a C-Corp (or at least w/e you would need to with an internet marketing biz) and you can take 'distributions' whenever you want and not have to pay SE tax on it- just income tax. I couldn't tell you if an LLC works the same way as far as distributions and taxation goes but I know that you'll definitely want an S-Corp or LLC to do business under.

I'm not an accountant so don't take my words as gospel because different states have different ways of doing things. For example my state doesn't charge state income tax so idk how that works in a state that does. Usually consultations with CPAs are free so feel free to make an appointment, write down all your questions on paper before you go in so you don't forget anything, and fire away. Its always better to hire a professional when dealing with the IRS.

-J