In Part 1 of our Turn Your Blog Into a Business series, we debunked the most common myths behind blogging as a business. If you’re serious about turning your blog into a small business, you’ll need to get legal in order to properly file taxes and avoid trouble with the IRS later on. While opening a legitimate small business may seem intimidating and a little scary, it’s actually fairly easy to do.
The first step in turning your blog into a small business is deciding on and forming a business entity. There are three common entities bloggers choose from: Sole Proprietor, LLC, and S. Corporation.
Most bloggers form a Sole Proprietorship when they’re just starting out. This means that you own and operate the business by yourself, and are responsible for all profits, losses, and debts. You may already be running a sole proprietorship without knowing it if you’re making money from your blog.
When it comes to taxes, sole proprietors files as individuals and use a Schedule C form, in addition to a standard Form 1040. Sole proprietors are accountable for withholding and paying taxes, including self-employment and estimated quarterly taxes. add links
No legal paperwork is needed to form a sole proprietorship, but your city or state may require you to obtain a business license. To see what business license(s) you may need to obtain depending on your area, visit the SBA website.
The advantages to forming a sole proprietorship for your blogging business are that it is the least expensive entity to form, you have complete control of the business, and tax preparation is quick and easy.
A Limited Liability Corporation (LLC) is also a good option for bloggers. While an LLC is a little more expensive to form, an LLC offers liability protection that a sole proprietorship does not. It allows you to separate your business assets from your personal assets.
If your business is sued or runs into financial trouble, the business will be responsible (and not you personally). In addition, forming a corporation or LLC may lower your tax bill.
An LLC must be registered in the state where it does business. Each state varies slightly, but in general they all require you to choose a distinct name and to file articles of organization.
The “articles of organization” is a document that legitimizes your LLC. It includes information like your business name, address, and the names of its members. For most states, you file with the Secretary of State. However, other states may require that you file with a different office such as the State Corporation Commission, Department of Commerce and Consumer Affairs, Department of Consumer and Regulatory Affairs, or the Division of Corporations & Commercial Code. Many states charge a filing fee for the articles of organization.
For a single owned LLC, taxes are filed just like a sole proprietor. An LLC with multiple members would file a Form 1065 to establish a partnership.
An S Corp is similar to an LLC in that it is treated as its own entity separate from the individual. Members of an S corporation pay income tax on the wages they receive and must have regularly scheduled director and shareholder meetings. S Corps are more expensive to form and require more maintenance as a business entity. They are generally not recommended for bloggers who are just starting their small business.
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Ben Sutton is the founder of Mazuma USA, an accounting firm providing tax, bookkeeping and payroll services to small businesses. Since founding Mazuma, Ben has established himself as an expert in the small business world. He’s still driven by that same desire to provide accounting help to all small businesses – from photographers, bloggers and creatives to lawyers, doctors, and dentists, everyone needs affordable accounting help. Ben is a Certified Public Accountant, and a member of the American Institute of Certified Public Accountants. But Ben considers his greatest achievement and credential to be his happy wife and four children.