Adult Site Owners

This is a pretty tough question. If your like me, you started out with a few tiny websites on a free host and stole some images and made some money with no out of pocket cost. And then you made more sites and created an empire. Now what do I do? Were do I go for help? Isn't incorporation complicated? Now your head is spinning.

I want to stress I'm not a certified accountant. And I'm not an attorney. But I do have a business degree. And let me recommend you consider incorporating. If your making more money than the average US worker and you plan to stay in the biz and grow then you should incorporate as soon as possible.

Here's what I recommend you do. Open up your phone book and contact your state's dept for the secretary of state. They are the state agency for filing the corporation papers. Give them a call usually there will be a voice mail recording with information. The paper work is not very complex they usually provide a generic incorporation document you just modify it with your information. Generally most states charge a minimum pre-payment on tax when you file and then yearly you will have a minimum tax due in California this is $800. Once you get your incorporation papers back you will need a federal tax id number. This is form SS-4 you can download it online from the IRS website. http://ftp.fedworld.gov/pub/irs-pdf/fss4.pdf All these forms are online.

So heres the run down on how to incorporate file with your state's secretary of state. Then get your new corporation a tax id number. Now you need a business checking account. I recommend you ask around cause certain banks are better for small business's needs. In California Union Bank has a reputation of being small business friendly. As always I recommend if your a corporation you find a good book keeper to keep your books straight. If you cant afford $800 for minimum tax and $100 month for a book keeper then your probably not ready to incorporate. Dont worry you can incorporate later, but spend this time gathering information and dont rush into this. Your book keeper would be able to recommend a few banks which their other clients use.

So now your incorporated, you have a tax id number and a business checking account. Now start contacting all your vendors to switch over your checks to the corporation and be sure they have your new tax id number.

Be sure to keep your business expenses separate from your personal. This is the key. If you cant do this yet then your not ready to incorporate. Some expenses that come out of your corporate account are. Office rent. If you work from home and you rent what percentage of your home do you use for business. This should be determined by a CPA. What about your fixed monthly expenses such as webhosting, internet access and computer lease extra phone lines. Your variable expenses would be marketing, content purchases and website design. Again consult an accountant about any other items you could deduct from the corporation such as computer equipment office furniture fax machine etc.

Be sure to read this paragraph twice. The second most important thing to do after keeping personal expenses out of the corporation and business expenses out of your personal account is to put yourself on salary. Any of the big payroll companies work fine. Yhey charge you a monthly fee. Pay your self monthly - bi-weekly but know that you can hold off paying yourself if want or you can call in payroll on an odd date, this is up too you, theres no legal period to do this. If you have employees then you need to follow labor laws.

I recommend for all new businesses you pay employees as freelance. Meaning you pay them out of payroll but they are 1099 no taxes are withdrawn. When a project is completed you call in payroll for them.

Payroll taxes are the biggest pain in the butt for a small business. Hiring a payroll company is worth the time you save with paper work. Also any accountant would be more expensive than the payroll company. The payroll company guarantees the paper work is filed correctly and completely. Most small companies get into tax trouble because of payroll being screwed up.

The other tip I highly recommend is open a mailbox at your local mail box company. This would give you a legal address not a po box. I recommend you do this prior to incorporating. The idea behind incorporating is to shield yourself from personal liabilities. After all the porn pass business has legal issues. You probably want to have a good lawyer available to you for advise also. Anyway back to this topic this mailbox would serve as the domain address your business's physical address. No one needs to know your home address if you work from home. I also recommend a mailbox in all cases.

Even if you have an office its better for them to march over to a mailbox shop then march into your office.

So those are the basics. File with the state secretary, get a tax id number, a corporate bank account, and a payroll company. Everything else can be done later.

Now I'm going to give you common FAQ from small business incorporating for the first time.

I have been taking money out of my corporation as I needed it and haven't paid any taxes yet this year am I going to get penalized?

Yes, you will probably owe some back taxes cause this year is almost over. Generally what you can do if your new is to repay money you took out as a loan later after you run payroll. Your the owner and you started pay checks when you could afford to do so. The payroll company will automatically withdraw tax due every month from your checking account so you will avoid future penalties.

What if I dont repay the money I took out?

There is a word for this. embezzlement. As owner of a business you can deduct business travel, business lunches and entertainment of clients as valid business expenses. You need to consult your accountant for the actual amount legally. If you were not incorporated the process is much more complicated. You would have to declare all money you received usually most vendors will 1099 at the end of the year. Then you can submit expenses and deduct them. Generally business deductions made on personal returns are looked at more closely by the IRS during audits so you could consider using most of those business deductions out of your corporation.

I'm totally confused. My finances are a mess I'll never be able to track everything.

Well, dont worry too much. The key is to start today doing things properly. Most vendors will 1099 you and you will pay taxes on those amounts. So you probably arent at risk of a tax court case. You probably are just missing out on legitimate deductions. As soon as you can start running expenses through your company's business account. Also all deposits from revenue your business generates gets deposited in your business account. Your personal expenses come out of your personal account which is funded by your companies payroll.

I was paying myself only two thousand a month enough to live on. but I was making twice that and my expenses were only a few hundred every months. What do I do now?

No worries you can adjust your salary as your company grows. They call this getting a raise. At the end of the year you can pay your self a dividend. Ask your accountant.

My business spent more than it made what do I do?

On average new businesses lose money for the first two years. Maybe you bought a lot of business expenses with a credit card or borrowed money from someone. Just be sure that you use the same credit card for all expenses for the business and not charge any personal items on it. keep things separate get a new creditcard specifically for business items. You probably want to make your corporation an S corp. This way you can funnel loses through to your personal income tax return. Ask your accountant theres a form to file for s corps.

What expenses are business expenses?

These are items that you purchased because you needed them for your business. This is not cable TV. But it might be news papers magazines. It also might be a new desk and lighting. The gray area is any expense that your business doesn't need. Your business probably doesn't need dog food. Think about it this way if you buy something you never used to buy before your business existed and you need it only because of your business then its a business expense. When you find an accountant he should be willing to spend at least an hour going over these items.

I'm going to be putting another FAQ together if you have any questions send me an email and I'll try to address it on future articles.

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