We’ve worked with a lot of bloggers in the last few years and we hear a lot of the same questions over and over again from talented and tech-savvy wordsmiths blogging on everything from gardening to exercise. We’re tackling your blogging business questions, one at a time, starting with the question all bloggers wonder at some point: Is My Blog A Business?
Why did you start your blog? The reasons probably range from “for fun” to “to make some extra money.” Unfortunately, the reason you started the blog doesn’t matter when it comes to whether your Uncle Sam considers it a business.
There are technically two ways your blog, or any home based hobby, becomes a business.
First: Without consulting you, and without your consent, the IRS designates your activity as a business if you have a “reasonable expectation to earn a profit.” For a little more clarity on how that is defined, ask yourself these questions:
- Does the time and effort I put into my blog indicate an intention to make money?
- Do I depend on the income from the blog?
- Do I run ads on my blog?
There are other considerations, but you get the idea. If you answer “yes” to any of these questions you’ve got a business on your hands, baby! Whether you like it or not.
Second: With your consent (they’re a little nicer), the State will designate you as a business if you apply to set up a business entity, like an LLC or S Corp. (Though, the caveat here is that if the IRS designates you as a business for tax purposes, the State does too.) But by setting up one of these entities, the State formally recognizes your activity as a business activity, separate and apart from your personal activities.
Why does it matter?
Big whoop, the IRS thinks you’re a business! So what?
Unfortunately, that means they expect to see the activity reported on your tax return…and for most bloggers or home based, hobby type, businesses, that means potential self employment tax, which can be an extra 15% surprise at tax time! A little planning can go a long way to make this a little easier to swallow.
For non tax, State purposes, having an LLC or S Corp will make a big difference if in the terrible chance you get sued for something your business did.