Mike Montali is the owner and founder of Harbor Compliance, an online service tool that specialize in helping business owner or owners with their government filings to help them get registered and / or stay compliant. They also help with business tax registration and a lot more.
The website’s Information Center is a useful tool that will give you a lot of ideas about any requirements you’ll need to have before registering your business, may it be small or large businesses or non-profit.
Types of Businesses (Based on the number of owners)
Example: I am blogging. I am making some money. I file my taxes on the money that I make, I am considered to be a sole proprietor.
Partnership – A company has two or more owners
a. General partnership
b. Registered partnerships
Example: Two of us started this blog and we’re making some money, we’re filing our taxes, etc., we are considered to be in a general partnership.
B. Business structures separate from you as the sole proprietor
Limited Liability Company, LLC – Suitable for most small business owners
Example: The income gets passed through to the owner. The owner has that liability shield so that, if someone were to try to sue the owner, they can only sue him for whatever assets the business owns but, not his personal assets.
More of the other benefits can be found here.
Note: Sole proprietors and general partners may be sued personally since they are not separate from their business. Any of their personal assets, could be used to pay a debt, whether it’s the result of a lawsuit or otherwise.
|Limited Liability Company||Sole Proprietorship||General Partnership|
|profits and losses of the business has through to the owners and those profits and losses will be shown on the owner’s individual tax returns||profits and losses of the business has through to the owners and those profits and losses will be shown on the owner/s’ individual tax returns|
|Owner is paying its own taxes rather the income; business itself is not paying taxes||Sole owner of LLC is paying the taxes, not from the income of the business.||Owners split the income and have it shown in their annual tax return.*|
* If a business has an income of $100,000, their Form 1040 will reflect an income of $50,000 each.
|C- Corporation||S – Corporation|
|Includes almost all big businesses, large fortune 500 companies||Small businesses***|
|has double taxation**||Taxation is similar to an LLC or sole proprietorship****|
** The corporation will pay taxes, and then any income that is distributed to the shareholders would also be taxed again.
*** These are businesses with under 100 shareholders, who are also residents of the United States.
**** The income is flown through to the individual tax return of the owner.
|LLC||S – Corporations|
|if the company has more than one owner, it has the ability to provide payments however it chooses||Less flexibility; money is distributed based on the shares represented|
|corporations have more formalities and records keeping that they have to keep up|
Registering Your Business as an S-Corp
Dividend – money that is provided to the shareholders, not as a salary but, as a distribution of profit
Note: LLC is NOT recognized by the IRS as a tax structure. It can adopt any of the existing tax structures which could be a sole proprietorship and S-Corp or C-Corp. The IRS has been totally accepting of that approach (bouncing from an LLC to an S-Corp and later to a C-Corp).
Registering Your Business as a C-Corp
Note: Should be reviewed with an accountant.
Registering Your Business (Within your state)
What does it take to form the LLC in that state?
You can use the information provided at the site for some overview of what the paperwork would be required, what the filing fees are and how long that particular state takes to process all those paperwork.
Registering your business out of state
Rule of thumb: Less than five owners or less, it doesn’t make sense to register outside of one’s home state.
Notes: Bloggers who may move from one place to another are still not advised to register out of state. If a business has several owners, it’s best to ask your tax professional or your accountant.
Question: If you have multiple blogs, should you register multiple businesses?
Answer: If you are the sole owner of the blogs, it’s best to simply register one business. If there are multiple owners with multiple ownership structures, then you should consider multiple businesses.
Note: A good strategy would be to start as a single business and then, later on register another and kind of funnel the other blog / business into that second entity.
Also, revenues would be easier to keep track if businesses were separate. Sit down with your accountant / bookkeeper and determine what would be best.
“Do you want all of the incomes from the two blogs to be combined into one business or would you rather have them be separate and know this is what the one blog is making and these are the expenses of the one blog that is separate from the other?”
Remaining Compliant After Business Registration
What is the annual filing requirement in that state?
Note: Never miss a filing because the penalties in some states are steep.
Learning With Leslie is a podcast dedicated to helping you build a business around a blog. No, not one of those blogs that will fall by the wayside when Google has a mood swing, but one that will thrive no matter what gets thrown at it.
I share tips and strategies that I’ve learnt building blogs since 2008 and interview experts who are knowledgable about various aspects of blogging so that we can learn from their experiences.
If you’re a blogger, thinking about becoming a blogger (pun intended) or are not even sure if blogging is right for you, go ahead and tune in to see what this blogging thing is all about.
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