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Businesses The Almighty Buck

Is a Weblog a Business? 37

Posted by Cliff from the if-it-generates-a-revenue dept.
Clinko asks: "I currently have a couple moderately successful websites with Google and Yahoo ads. Combined, they will generate a couple thousand this year. (Sounds great, but read on...) The problem is that I know nothing about starting a business, filing taxes (U.S.) on such, or if I even need to be a licensed business. Will I need to start a licensed business on income generated from ads? I'm sure someone from Slashdot has been in a similar situation. What was your solution?"
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Is a Weblog a Business? More

Is a Weblog a Business?

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  • tax accountant, H&R Block for example. I'm sure if it's under a certain amount you can just declare the intake as income, but as a business you may be able to find specific deductions for parts of the business. People here can speak from experience, but for a few bucks talking to an expert that you'll be able to bitch at if you get audited is worth it imho...

  • Get professional advice.. (Score:3, Insightful)

    by junster2 ( 573899 ) on Tuesday January 10, 2006 @11:56AM (#14436118) Homepage Journal
    The best and only advice I can give you is to find a good accountant and a good lawyer. If it makes sense to turn it into a business, they will let you know.

    Slashdot is good for somethings, this is not one of them.

  • Accountant (Score:4, Insightful)

    by mjpaci ( 33725 ) * on Tuesday January 10, 2006 @12:00PM (#14436152) Homepage Journal
    Do not go to H&R Block on this one. Go talk to an accountant -- it'll cost you $300 which you can then turn around and deduct. You probably are a sole proprietorship [irs.gov] -- but if you have doubts, talk to an accountant. Do you live in the US? If not, take the money and run -- from your own government.
    • "Do you live in the US? If not, take the money and run -- from your own government."

      You're implying that non-US Governments should be ran away from in tax matters? That tax matters only matter in the US or what?

    • Re:Accountant (Score:3, Insightful)

      by Morgalyn ( 605015 )
      I second this one. Do not go to franchised accounting firms which focus primarily on doing simple personal income taxes such as H&R Block and Jackson Hewitt (its actually possible none of the people there are trained accountants (with, say, a college degree or experience in the field)). What you want is to talk to a Certified Public Accountant (CPA). A CPA is required to stay up to date on tax law and other accounting information by participating in a minimum number of continuing professional educa

  • Sole Proprietorship (Score:3, Informative)

    by evilpenguin ( 18720 ) on Tuesday January 10, 2006 @12:01PM (#14436172)
    You are a sole proprietorship. Your income will be reported on your personal income tax. You should get a 1099-MISC from your ad agencies.

    As others have said, you can talk to a lawyer and/or an accountant to see if you could save money by doing something more "advanced," but I do the above. It adds two forms to your 1040: Schedule C and Schedule SE. About half your income from the blog will go to taxes.

    • Re:Sole Proprietorship (Score:4, Informative)

      by enrico_suave ( 179651 ) on Tuesday January 10, 2006 @12:12PM (#14436322) Homepage
      IANAA but the parent is right.

      I have a comprable situation with my sites and income derived there from.

      You will want an accountant to help sort out which business type is best for you based upon the amount of liability you're willing to personally take on, what tax structures/consequences, amount of paper work you're willing to deal with, etc.

      You seem to be running a sole proprietership just by the fact of getting this extra income and you most likely used your name and your social security number to set it up with google ads/yahoo ads and will get a 1099-misc from them to file as additional income. As I mentioned in the previous paragraph you'll want to consider which business arangement (with help of accuontant/lawyer) makes sense for you... sole proprietorship, LLC, Inc. etc...

      There are benefits and drawbacks to each (hence the professional help).

      It probably makes some sense to get some sort of legal entity registered with your state/etc and business classification so that you can subtract business expenses from your income so that it doesn't count as much towards your overall income. Again, this isn't tax advice, consult a professional... but if you have an online/advertising business some seemingly legitimate expenses would be: internet access (if used only for business purposes, or do a percentage), webhosting, advertising to promote your site, bank fees, probably a PC to do updates/edits, other costs incurred in relation to your topic/content *shrug*

      It may or may not be worth the accounting headache, but that depends on the amounts we are talking and your personal tax situation.

      You may also, assuming a day job, want to/need to adjust your income tax withholding to compensate for the extra income (or not... IANAA)

      Good luck with your modest web publishing empire!

      E.
    • It adds two forms to your 1040: Schedule C and Schedule SE.

      Yup. I operated some web sites that generated some income for a few years (back when AdultCheck was still an age-verification service to protect web site operators, not the commercial porn subscription service it later became), and these days I get a little on the side from GoogleAds. Schedules C and SE are all that this has added to my annual form-filling ritual.

      About half your income from the blog will go to taxes.

      That depends on what kind

  • Sole Proprietorship is Simple (Score:5, Informative)

    by breadbot ( 147896 ) on Tuesday January 10, 2006 @12:03PM (#14436190) Homepage

    IANAA (Accountant), but I've done a few thousand dollars' worth of consulting -- never more than about $10k in a year -- and self-employment tax is simple. You just get a 1040-SE form and fill it out. The tax rates are a little higher (about 7.5% for me) than if you are employed because you will have to pay your own social security employer's tax (I guess part of social security tax is paid for by the employer). If you make very much, the IRS wants you to file estimated tax payments quarterly, but that's not too hard either. If you've been doing your own taxes, then you can definitely handle the additional paperwork. You can even include expenses on a 1040-SE.

    • (I guess part of social security tax is paid for by the employer)

      While that's true, it's also highly disingenuous (of the government, that is, not the parent).

      If my company had 7.5% more of my salary, it might consider raising my salary. (Not by 7.5%; I'm not insane, but perhaps 2%--so it is still coming out of the employee's "total benefits package".)

    • Well, I don't know what information you got (I'm not disputing it by the way) but when I go to the IRS website I get a fucking goddamn mountain of documents on filing quarerly payments and estimated payments and it was not at ALL clear to me under what conditions I actually have to do that (you indicate that there is some monetary limit...I was unable to determine this). The IRS documentation is so "helpful" I want to strangle myself. They have litanies of "simple" 33-step processes to just determine qual

  • NoLo (Score:4, Informative)

    by _LORAX_ ( 4790 ) on Tuesday January 10, 2006 @12:16PM (#14436374) Homepage
    "Tax Savy for Small Buisness" by NoLo press ... should have more than enough information to keep you out of trouble with the IRS. You can pick it up in any local bookstore. Look for the signature yello/orange books.

    Trust me, they are excellent and colover all you need to know ( and a lot more ).

  • Various levels of business (Score:4, Insightful)

    by Ken Hall ( 40554 ) on Tuesday January 10, 2006 @12:20PM (#14436427)
    If your advertisers issue checks directly to you, in your name, you really don't have to do anything except report the income on your personal income tax return. Even if they don't issue you 1099s, you should do this. They pretty much HAVE to issue the 1099s though, in order to write off the expense. It's a sort of cross-check, see?

    If they're happy working this way, going farther is more up to you.

    If you want them to issue the checks to a separate entity, like a company, you have to go through some additional hoops. You have to register the company name ("Fictitious Name") with the state, and then go to your bank and set up a Business checking account to receive the money. It's still YOU, YOUR income, you're just providing a separate pocket to drop the cash into so you can keep track of it.

    The next set of levels come up if you want further separation of the company from you, if there is more than one person involved (partnership), or if you want to protect yourself from being sued. Then you need something like an LLP or a Corporation. Some companies won't deal with individuals or Sole Proprietorships because they don't like the trouble of issuing 1099s, so they will require you to set up a corporation. Reporting income from Corp-to-Corp payments is the responsiblity of the receiving party, so the payer can just issue the check and be done with it.

    The problem with doing this, is it opens you up to a whole new level of paperwork and reporting for very little good reason. (One friend of mine ran an extremely successful and profitable computer service business as a sole proprietorship for YEARS because he just didn't want to bother with the paperwork.)

    Rule of thumb: Do as little as your customers will accept and you feel comfortable with. As long as you pay the proper taxes on the income, generally speaking, nobody will bother you, and even if the IRS comes calling, you can show them you've followed the rules.

    DISCLAIMER: I am not a lawyer or accountant, but I've had my own consulting business (S-Corporation) for close to ten years now, and I have friends and associates who also run their own businesses in various forms, so I have some familiarity with the ins and outs.
    • I just want to second what was said to the parent to this. I have run a couple of separate part-time businesses and the steps above are exactly what I went through.

      The only thing I would add is - you'll also likely need a business license from your community to set up the Business account at the bank. From memory, they are looking for the business license not the DBA (Doing Business As) registration. Depending on the community - this is likely $100-$200 a month (YMMA).
      • I don't know where you live, but that number sounds awfully high. I pay an annual fee (like $50) in New Jersey for my S-Corporation, and that's it. Unless you have a storefront, need permits, etc., there shouldn't be any other periodic fees to the state or town. You register the DBA/Fictitious Name with the state, they send you a letter saying it's been done, and you go to the bank. If your town has screwy rules, go to a bank in a different town.

        The only time this becomes a problem is if you're running

  • check state and local resources... (Score:3, Informative)

    by enrico_suave ( 179651 ) on Tuesday January 10, 2006 @12:22PM (#14436447) Homepage
    Small Business Association [sba.gov]

    and someone mentioned NOLO [nolo.com] which has a lot of articles (besides the publication mentioned) on legal stuff...

    Good to get a sense of this stuff before seeing the accountant...

    e.

  • Keep in mind your personal liability (Score:3, Informative)

    by Pengo ( 28814 ) on Tuesday January 10, 2006 @12:29PM (#14436576) Journal

    Just keep in mind that in a sole proprietorship, that your personally liable for your business. Most small businesses can cruise along just fine, but if you are worth a lot (house, car, etc), I wouldn't risk it. Also, if you plan on posting things that are potentially litigious on your weblog, I would consider at least a LLC. I am not sure if there are messed up laws that could potentially tie you up in litigation from the actions of your users, who knows (a lawyer, definitely not me).

    You can usually do that for under $250, and under $500 with a lawyers help. I seem to remember thats how the costs for us, our small logistics software house, to incorporate LLC in Nevada.

    Good luck with your venture!
    • I only found an accountant AFTER I set up my S-Corp, and he told me I'd done it slightly wrong. He actually recommended an "LLP", which is a new type of business, although I don't know all of the details.

      The problem with going down this road is that (like I said in my other post) it opens up a whole new level of paperwork.

      The idea, like he says above, is to limit your "liability", so if someone sues the blog, they (theoretically) can't take your house, but in practice, if things aren't set up EXACTLY right

  • Be cautious about "business" deductions (Score:3, Informative)

    by mutterc ( 828335 ) on Tuesday January 10, 2006 @12:33PM (#14436640)
    You will have to report the income, as "self-employment" income. That's not any more difficult than anything else relating to individual taxes.

    If you want to consider this a "business" and write off the expenses related to it, the IRS says it's got to be an activity carried on for the purpose of making a profit, not just a hobby that happens to generate income (even if it's a net profit). They have some nice, vague criteria on their website. Being considered a hobby doesn't free you from paying taxes on the income, but it does prevent you from deducting the expenses.

    As for needing licenses, that's highly dependent upon your state, county and city (any of them might require licenses). I live in Raleigh; North Carolina has a "Business License Information Office" you can call, and they will tell you what licenses you need. Hopefully your state / locality has something similar.

    My guess would be that nobody will care about licenses since you're not "engaging in a trade". However, only your state / local government knows for sure.

    • "If you want to consider this a "business" and write off the expenses related to it, the IRS says it's got to be an activity carried on for the purpose of making a profit, not just a hobby that happens to generate income (even if it's a net profit). They have some nice, vague criteria on their website. Being considered a hobby doesn't free you from paying taxes on the income, but it does prevent you from deducting the expenses."

      Discerning this sorta stuff is exactly where a good Accountant/lawyer/profession

    • Re: (Score:2, Informative)

      by account_deleted ( 4530225 )
      Comment removed based on user account deletion
  • First of all, there really isn't any such thing as a "Licensed Business". Not in IT, in any state I know of anyway. Anyone can do work and get paid, as long as they report the income. Anyone can register a "Fictitious Name", open a bank account, and collect money. Licensing only comes into it when your business is regulated in some way, and then it's usually the "instance" (store, bar, restaurant, etc.) that's licensed. The business itself isn't.

    If you SELL STUFF, you have to register with your state t
    • Estimated Tax payments:

      You must contribute extimated tax payments if your 2005 withholdings are less than the smaller of:
      - Your 2004 tax liability
      - 90% of your 2005 tax liability

      It's too late to worry about it now for 2005, but you can prepare for 2006. If you didn't make payments and you should have they'll tell you when you submit your statements at year end. They'll send a letter with a fine and any penalties, they shouldn't be too high if you only made a few thousand.

      If you received a


  • Working for yourself [nolo.com] by Stephen Fishman is an excellent resource on this topic.
    It presents the facts clearly and offers up solutions for improving your tax situation.
    It answers many questions like business form (LLC/S-Corp/C-Corp), what is and isn't deductible, proper reporting and accounting, tax benefits like health savings accounts, etc, etc.

  • Liability (Score:3, Informative)

    by the eric conspiracy ( 20178 ) on Tuesday January 10, 2006 @01:29PM (#14437348)
    The primary purpose of forming a corporation is to shield your personal assets from business creditors, secondly to gain favorable tax treatment. I know someone who failed to do this and lost their house.

    Be careful, see a lawyer, get the appropriate insurance if you are incurring any sorts of liability.

  • If you aren't going to be dealing with employees then the process is pretty straightforward. I'm not an accountant but I have started a couple of sole proprietorships over the years.

    If you want to make things look more 'legit' by starting up a DBA it doesn't greatly complicate your taxes.

    You should be able to find out where in your local area you to go to get a DBA (doing business as) form to set up a sole proprietorship. It usually costs about $20-$25. This gives you to the ability to do business as "Bob's
    • Actually, there are a few points in your post which I do not agree with.

      First, if he is just collecting some ad revenue checks from his web log, why does he need get a "business name" (i.e DBA). In my locality, filing a DBA costs a couple hundred dollars and unless you have some public-facing business where you need a catchy name, there really isn't any point. All the guy wants to do is to make sure he doesn't get in trouble with the IRS.

      Second, you state:


      Now, if you have a lot of purchases associated wit
  • There are legal issues regarding "adventures in trade": you may need a license, you may have to collect sales taxes, etc.

    Others have pointed all this out, in addition to certain advantages that businesses have over individuals when it comes to taxation: expenses can be deducted from revenue, and capital expenditures can be depreciated. How to do this correctly requires the advice of an accountant and lawyer.

    But, the number one thing you should remember is that you have to pay your taxes on the income yo

  • DON'T Form a Business (Score:4, Interesting)

    by BitGeek ( 19506 ) on Tuesday January 10, 2006 @03:59PM (#14439043) Homepage

    Let me tell you, filing a business license is a great way to become personally acquainted with every level of government in your state, because they will all call you up with forms for you to fill out and taxes for you to pay.

    Being a business is a licensed class, and unless you *need* to, don't do it.

    What you have is a hobby. Keep it a hobby. If you're concerned about being sued, well a small business will not protect you, you'll still have to hide your assets anyway.

    If you keep it as a hobby you don't have to pay taxes on the income, provided it doesn't exceed your hobby expenses. IF you keep it as a hobby you dont' have to file countless forms every three months, pay thousands ot lawyers accountents, etc. And if you keep it as a hobby you are better protected.

    The only reason you would ever want to form a business is if you plan to sell stock, or if you need to form a partnership and have joint property.

    Seriously. People have been told a lot of gruff, and of course, accountants and lawyers have spread the idea that you need to lawyer up and have an accountant going over everything.

    But you don't. Regular old tax software will handle your small business accounting as far as the IRS is concerned (and if you get some you'll see the advantages to keeping it a hobby) The IRS recognizes hobbies as a legitimate area where you can make some money, and while they will want their share of it, tehy will only want a share of your profits.

    Forming a business results in a never ending amount of hassle-- from a greatly increased amount of bulk mail to periodic calls and even visits from random taxing authorities you've never heard of.

    I learned my lesson once, never again.

    Also, if you do want to form a business for whatever reasn, consider forming it out of state-- nevada is a good state, or out of hte country, such as in the carribean. In that case, you just need to file a registration to do business in your state. Since the business is not domiciled in your state, its a much lower burden of paperwork and regulation.

    And virtually every business friendly country, or business friendly state is likely to give you a vastly better level of business protection (privacy, insulation etc) than your home state.
  • IANAA, but I do my own taxes every (the long ones) and I've read a bit of tax law (bit being relative to the whole). If you don't actually profit from it, i.e. you spend all the money you make upgrading your hobby related computers, buying bandwidth, etc.. it's not taxable. It is still reportable but all of the income is deductable. It is pretty simple IIRC too (only one extra form)

    Of course if you are actually making a profit, then never mind...
  • Simple: Go figure it out for yourself.

    Go to the local library. Check out books on running a business, setting up a corporation, accounting, and everything you are curious about. Find out what you have to do to make it all legitimate. There is a wealth of information available. If the local beauty salon can figure it all out, so can you.

    Fortunately, in the US, that income you generate is considered personal income. You are taxed just as much as if you had a job. Unfortunately, that means you have to pay Soci
  • Others have talked about "turning it into a business". I am in Australia, and the detail will be different, but if it is earning you a regular income, it is a "business" as far as the taxman is concerned. Get a good accountant, one that you feel comfortable with, and see that you claim all the deductions available. Incidentally, H. & R. Block operate in Australia as well. I have never used them, but they seem to know their stuff. But you need somebody who will advise you on business strategies as w
  • I am not a professional accountant or lawyer, so take my advice for what it is worth. However, my wife owns her own business so I have some exposure to the world of self-employment.

    First, you ask about getting "permits" and such. You will have to check with you locality, but where we live, you probably would not need any "permits" for what you are doing. If you wanted to register a business name, you would need to get a "permit". If you were selling merchadise, you would need to collect sales tax so you

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