How do you guys find accountants/lawyers that are experienced with the Online industry? All the ones I find have practically no clue what making money online is.
Are You Set Up As A Sole Proprietorship, LLC, Or S-Corp?
- Thread starter Fiver
- Start date
Everyone generally says "form an LLC for personal liability purposes"... But seriously, as an affiliate -- who is going to sue you and what is really your personal liability an LLC will protect you from??? I'm serious, I don't understand it. You put your expenses on credit cards - you've got to pay those... If you break the law (trademark, copyright, libel/slander, etc, etc, etc) then they will go after YOU and your LLC will not protect you for squat. If your merchants/networks don't pay you, you're LLC's not going to help at all. So what does everybody think the LLC will protect them from and can anyone give an example of where an affiliate was sued and the LLC actually helped them avoid liability, bankruptcy or whatever....
I think it's one of those things that everyone says, "set up an LLC for your liability, dude..." but no one really understands what their liability is and how an LLC can or cannot protect you... If anyone can explain how an LLC can REALLY protect you (versus a sole prop) I'd love to hear it....... (I've asked a lawyer and they say it won't provide any protection, but most people here seem to be setting up LLCs so what liability do you all think you're getting protection from???)
I think it's one of those things that everyone says, "set up an LLC for your liability, dude..." but no one really understands what their liability is and how an LLC can or cannot protect you... If anyone can explain how an LLC can REALLY protect you (versus a sole prop) I'd love to hear it....... (I've asked a lawyer and they say it won't provide any protection, but most people here seem to be setting up LLCs so what liability do you all think you're getting protection from???)
So, let's say you set up a sole proprietorship. Everything's going well. Let's say the worst case scenario happens, and you have to go bankrupt for whatever reason.
With a sole proprietorship, anything is up for grabs. You can easily have your car, your house, and all your savings taken away. This is because your personal assets count as business assets as a sole proprietorship. All debt incurred by your company is applied to your personal assets.
LLCs and other types of business avoid this by placing liability on the corporation or company, rather than themselves.
Hope this helps.
With a sole proprietorship, anything is up for grabs. You can easily have your car, your house, and all your savings taken away. This is because your personal assets count as business assets as a sole proprietorship. All debt incurred by your company is applied to your personal assets.
LLCs and other types of business avoid this by placing liability on the corporation or company, rather than themselves.
Hope this helps.
What seether was getting at is that affiliates that register an LLC but still use personal credit cards to finance things willfully negate the protections afforded an LLC by intermingling their personal life with their business life. When you do that (or other things that blur the lines of where business ends and personal begins) and get sued the AG or a plaintiff will attempt to "pierce the corporate veil" in order to go after your assets. Just being a one man show isn't enough to negate the protections, but conducting your business in a haphazard or sloppy manner is.
QFT ^^^
This is exactly the way I understand it. Though if you are doing something shady, that veil will pierce quickly. Still, it's better than nothing.
BINGO! And what can you really do as an affiliate that isn't shady and that will get you sued or drive you to bankruptcy such that you'll need LLC protection??? Nothing I can think of...........
It's fine to set it up that way (even "legitimizes" your business more...) and definitely keep $$ and records separate as pointed out earlier, but don't think you're getting legal protection to do whatever you want -- if you break the law, they'll come after everything you have (not just what your LLC has)....... And if you're not breaking the law - it's hard to see how an affiliate could get sued such that LLC protection is required...
For the first few years I started as sole trader (UK term for trading in my own name) but at a certain point when I was serious about growing the business, moved over to a Ltd company.
Ltd companies I feel are:
Downsides are more red tape and higher accounting (and possibly legal) fees. But I haven't found it that big a deal.
As a sole trader I spent maybe $700 a year in accounting fees. As a ltd company, maybe $2,000 - but as mentioned I get tax advantages so it probably evens out.
So a company will cost you more and requires more paperwork I find, so you may not want to start with one immediately, but at a certain point you can move your sole trader business over to a limited company if it makes sense for you to do that.
Best thing to do really is find a good accountant (and maybe lawyer too) and talk to them. They often give free consultations to new potential clients.
Ltd companies I feel are:
- A much more structured set up for your business
- More organised accounting-wise (business and personal finances are entirely separate)
- Look better if you're working with clients
- Generally give you tax advantages
- Help protect your personal assets
- And work better if you're looking at recruiting.
- Also, it's easier to sell if you choose.
Downsides are more red tape and higher accounting (and possibly legal) fees. But I haven't found it that big a deal.
As a sole trader I spent maybe $700 a year in accounting fees. As a ltd company, maybe $2,000 - but as mentioned I get tax advantages so it probably evens out.
So a company will cost you more and requires more paperwork I find, so you may not want to start with one immediately, but at a certain point you can move your sole trader business over to a limited company if it makes sense for you to do that.
Best thing to do really is find a good accountant (and maybe lawyer too) and talk to them. They often give free consultations to new potential clients.
With an LLC, people can't come after the members personal assets. With a sole proprietorship, a customer, business, etc can come after the business and your personal assets.
You do realize that a decent percentage of members here at WF who aren't just affiliates. From what I've seen wicked fire members:
- Own digital products
- Own an e-commerce store
- Are lead-gen advertisers
- Own a CPA network
- Own an seo agency
- and other shit
Your state will really determine the amount of protection you receive. In my state (PA), I have a very reasonable amount of security against my personal assets.
This isn't strictly true. In many instances of a lawsuit, even with an LLC, you can be named and your personal assets attached.
You still need a proper umbrella liability policy and they're not that expensive.
In an LLC the idea is to limit the liability of investors in the company, not the managing members.
Anytime you do corporate structuring make sure you get 2 people to advise you.
1. You're CPA which you've already done.
2. Also make sure you talk with an attorney that understand where you are now and where you want to be 5 years from now with the company. Based on that future planning those choices might change.
1. You're CPA which you've already done.
2. Also make sure you talk with an attorney that understand where you are now and where you want to be 5 years from now with the company. Based on that future planning those choices might change.
S-Corps - All income is pass through income and you end up saving on the payroll taxes..
The main difference is this:
S-Corp - you have to pay the shareholders the percentage of stock they own.. and you have to take minutes.. the problem is .. you may want to pay them differently...
If you want around that - LLC's can distribute profits however they like..
So my s-corp goes something like this:
I own 80% of the company.. my partner owns 20% of the company.. we split the profits up 80/20..
My LLC - I own 80% of the company.. my partner owns 20% of the company but he does all the work.. we split the profits 50/50.. teehee
However, My other LLC is getting f'ked hard..
------
Affiliates beware..
The current mismanagement of USA funds is causing the govt to seek and steal money from anyone and any industry..
If they are successful, they will require businesses to register in ANY state that they have affiliates in.. (called a Nexus).. they already require this for MLM companies.. and they want to expand this to all companies who have affiliates..
This requires them to pay state sales tax (and if u thought the govt had their shit together .. wait until you see the states.. they are so f'n clueless about "THE ENTERNET")
That means that businesses will have to pay sales tax on little johnny who registered as a free affiliate and is doing nothing.. the states wanna pretend that the biz has a "physical" location in the affiliate's state.. that's all 50 states.. plus little weird townships and villages that collect it themselves..
What does this mean..
Biz could shut down their affiliate program in your state.. (like Amazon did to New York)
Less profits for affiliates? not sure..
BUT I SMELL TROUBLE A BREWING!!!
The main difference is this:
S-Corp - you have to pay the shareholders the percentage of stock they own.. and you have to take minutes.. the problem is .. you may want to pay them differently...
If you want around that - LLC's can distribute profits however they like..
So my s-corp goes something like this:
I own 80% of the company.. my partner owns 20% of the company.. we split the profits up 80/20..
My LLC - I own 80% of the company.. my partner owns 20% of the company but he does all the work.. we split the profits 50/50.. teehee
However, My other LLC is getting f'ked hard..
------
Affiliates beware..
The current mismanagement of USA funds is causing the govt to seek and steal money from anyone and any industry..
If they are successful, they will require businesses to register in ANY state that they have affiliates in.. (called a Nexus).. they already require this for MLM companies.. and they want to expand this to all companies who have affiliates..
This requires them to pay state sales tax (and if u thought the govt had their shit together .. wait until you see the states.. they are so f'n clueless about "THE ENTERNET")
That means that businesses will have to pay sales tax on little johnny who registered as a free affiliate and is doing nothing.. the states wanna pretend that the biz has a "physical" location in the affiliate's state.. that's all 50 states.. plus little weird townships and villages that collect it themselves..
What does this mean..
Biz could shut down their affiliate program in your state.. (like Amazon did to New York)
Less profits for affiliates? not sure..
BUT I SMELL TROUBLE A BREWING!!!
Super8290,
You shouldn't try to hijack threads with your talk about affiliate taxes. Start a new thread with that stuff.
Also know that it's very old news. It would be more useful if you were posting about current pending legislation that we can do something about.
You shouldn't try to hijack threads with your talk about affiliate taxes. Start a new thread with that stuff.
Also know that it's very old news. It would be more useful if you were posting about current pending legislation that we can do something about.
I think it applies to the setting up the LLC.. if a company has multi-tier payouts.. they have to register the nexus in every state after setting up the LLC.. or risk getting huge fines when they are caught.. not trying to hi-jack the post.. is there a way to edit the post?
Coming from the real estate world, you set up a separate co. for each property. that way if some stupid fuck trips and falls at property A, then can't go after the other 100 properties you own. these all usually flow up to some mothership company. Now, this only makes sense at a certain size. If you have a bunch of small houses, you bundle them together. If you have large properties, each is its own company.
Is that the same concept you guys use? It seems that most here have 1 or two companies set up. Any need to separate things out among different websites? I guess it doesn't make sense if you have hundreds of websites making $1 a day, but what if you have a few pulling in cash? Or maybe websites in one and outside services you offer to clients in another?
Is that the same concept you guys use? It seems that most here have 1 or two companies set up. Any need to separate things out among different websites? I guess it doesn't make sense if you have hundreds of websites making $1 a day, but what if you have a few pulling in cash? Or maybe websites in one and outside services you offer to clients in another?
I'm an SP, but I don't make enough cash to switch off it yet. I can write off a whole bunch of stuff though, which makes me happy 
Honestly, I found legalzoom.com to be well worth the investment. I was pretty clueless how to set my stuff up and they pretty much handled the paper work for me aside from a couple of signatures that were needed and then mailed to the State.
I have a sole proprietorship (DBA). An LLC protects you a little bit more but I'm not doing anything shady so I'm not too concerned. I'll probably move up to an LLC if I ever quit my day job and do this full time.
I have a sole proprietorship (DBA). An LLC protects you a little bit more but I'm not doing anything shady so I'm not too concerned. I'll probably move up to an LLC if I ever quit my day job and do this full time.
It might be worth noting (if nobody did) that S-Corp is a tax classification, not an entity type. You can be an LLC and be taxed as an S-Corp (or a C Corp taxed as an S-Corp).
Here are the only real differences...
LLC
You have to pay quarterly estimated taxes throughout the year. Profit then comes over to your personal tax return EOY. You land in the tax bracket according to your profit.
S-Corp
You have to do payroll (including yourself) by W2ing your employees. You can pay yourself salary or commission based. You must pay yourself according to what the average yearly amount a person in your position would earn - reason is the government wants you to pay social security on your earnings.
S-Corp profit then comes over to your return EOY and you pay taxes on the S-Corp profit according to the tax bracket you fall in - I think it ranges from 20-35% (35% is when you hit 373k+ for the year).
If you don't pay yourself a wage according to what you profit from the business you can get in trouble and possibly lose your S-Corp status and they will turn you into a C-Corp. So just make sure you do payroll and do it right.
C-Corp
This is taxed the highest at 36% across the board. It's completely separate in how the taxes are taken and basically whatever the business makes you have to pay 36% on it.
The choice most people take are LLC or S-Corp. LLC is more of a passthrough type entity because the profit just comes across on your taxes. S-Corp is a pain in the ass because you have to do payroll but there are some additional advantages to it apparently (but nothing in regard to tax savings or paying less taxes).
--
I am not an accountant or anything of that sort but I just went through all this when dissolving my LLC and creating the S-Corp. I wanted to know all the differences so I asked my new accountant and the above is what was said to me. I am sure there may be other advantages/disadvantages but I was more concerned about the tax money owed and how and when you had to make payments on the profit earned.
Got' damn that was a lot of typing!
Brian
LLC
You have to pay quarterly estimated taxes throughout the year. Profit then comes over to your personal tax return EOY. You land in the tax bracket according to your profit.
S-Corp
You have to do payroll (including yourself) by W2ing your employees. You can pay yourself salary or commission based. You must pay yourself according to what the average yearly amount a person in your position would earn - reason is the government wants you to pay social security on your earnings.
S-Corp profit then comes over to your return EOY and you pay taxes on the S-Corp profit according to the tax bracket you fall in - I think it ranges from 20-35% (35% is when you hit 373k+ for the year).
If you don't pay yourself a wage according to what you profit from the business you can get in trouble and possibly lose your S-Corp status and they will turn you into a C-Corp. So just make sure you do payroll and do it right.
C-Corp
This is taxed the highest at 36% across the board. It's completely separate in how the taxes are taken and basically whatever the business makes you have to pay 36% on it.
The choice most people take are LLC or S-Corp. LLC is more of a passthrough type entity because the profit just comes across on your taxes. S-Corp is a pain in the ass because you have to do payroll but there are some additional advantages to it apparently (but nothing in regard to tax savings or paying less taxes).
--
I am not an accountant or anything of that sort but I just went through all this when dissolving my LLC and creating the S-Corp. I wanted to know all the differences so I asked my new accountant and the above is what was said to me. I am sure there may be other advantages/disadvantages but I was more concerned about the tax money owed and how and when you had to make payments on the profit earned.
Got' damn that was a lot of typing!
Brian
