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Incorporating My Webmaster Business

should I Should i Not

12:40 am on Oct 30, 2005 (gmt 0)

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I make good money Doing Pay per click but haven;t form a corporation or anything. I do Include My internet income in my personal taxes.But i would like to make a separate corporation (what kind?) or should i leave it alone like that. What will be the benefits of corpoation.
4:28 am on Oct 30, 2005 (gmt 0)

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Benfits of a corp would be:
to shield you from company liability
to allow the corp to operate as seperate "person" and pay its own taxes (C corp)
to allow you to sell shares (C or S corp)

If you are not concerned about product liability, then there are few really great reasons. IF you are a one person corp, then there is no real tax difference between sole proprieter, LLC or S corp. You also will not be likely to get loans or credit for the company without a personal guarantee, so no benefit there either. It would take several years of corporate tax returns to provide enough proof to a bank that it is a valid entity in its own right.

Also, dont forget that C and S corps need to have annual meetings, file annual reports etc. or the shield of the corporation becomes null and void. LLCs do not have this rule, and some lawyers feel that they are less sheilded. So unless you are trying to go public and be the next google, there is not really any benefit to being a corporation.

My company is an LLC. We sell truck accessories and wanted to protect ourselves from liabilty lawsuits. If the company is successfully sued, then there are barriers for my personal assests. I also wanted to not have my personal credit score directly impacted by business activity, because I do some real estate investing on the side. I still had to sign personal guarantees, but my credit report will only show the business debt if it does not get paid. Otherwise it appears that I have less credit extended than is the reality. This is useful to me for the purpose of qualifying for home loans.

I hope that helps!

4:58 pm on Oct 30, 2005 (gmt 0)

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A C-Corp can be beneficial if you are making a lot of money. Suppose you made $150K, but only took $50K as personal income and wanted to leave the remainder in your business account. As a SP, LLC or S-Corp, you would be taxed on the entire $150K as personal income. If you were a C-Corp, then you could pay yourself the $50K as a salary/bonus, and only pay personal income on that amount. The C-Corp would be taxed on the remaining $100K. By spreading your income over two tax returns, you end up paying less overall tax than if the entire amount were flowing into your personal tax return.

If you are not leaving money in the business at year-end, then an LLC or S-Corp is the better choice. But there's really no tax benefit, as gpilling pointed out, only the legal liability protection.

6:32 pm on Oct 31, 2005 (gmt 0)

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A C corporation has the advantage of being able to pay all your medical expenses from pre-tax income instead of you having to pay insurance or pay medical expenses from personal taxed income. For this reason alone, I am incorporating.