Incorporating Your Blogging Business
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Should you incorporate your blog and turn it into an official business by forming a Limited Liability Company (LLC), an S Corporation, or a C Corporation? The truth is you can continue running your blog as a Sole Proprietorship for as long as you wish. A Sole Proprietorship is an unincorporated business in which the owner pays personal income tax on the profit generated from his/her business. Sole Proprietorships are popular among bloggers because they are the simplest to set up. However, there are also benefits to turning your blog into an official business.
Even if you decide not to incorporate right away, you should treat your blog like a business from the very first day. Maybe, you’re waiting for the right time to incorporate or perhaps you want to develop an audience first or make a certain amount in profit before incorporating your blog. Whatever your decision is, I hope to shed some light on the benefits that come with incorporating your blog. I also hope to share the differences between an LLC, S Corporation, and a C Corporation. I will later discuss which one of these incorporated entities is right for blogging purposes.
Benefits of Incorporating your Blog
Some of the benefits that come with having your blog incorporated are:
An Increase in your credibility
People are going to take your business more seriously if it has been officially incorporated. Some affiliate programs, advertisers, as well as other businesses will only work with you if you have an incorporated business. Having your business officially incorporated also shows customers how serious you are about your blogging business.
Protect your personal assets from liability
With a Sole Proprietorship, there is no difference between your personal assets and your business assets. However, if you incorporate your business, your personal assets will be separate from your business assets. This is particularly important if there is a lawsuit or any other legal action against your company. If this ever occurs, you can shift all of the blame towards your company and your personal assets will be protected from liability.
Tax advantages and deductions
Expenses related to blogging are tax deductible as long as the costs are necessary costs. Some examples of tax deductible expenses for bloggers include hosting fees, internet connection, and software used for blogging. Bloggers can also create home offices for their business and write it off as a tax deduction too.
Perpetual existence of your business
When you decide that it’s time for you to retire from your blogging career, your blogging business will continue to exist even after the owner has changed. This perpetual existence also gives you a chance to sell your blog and assets related to your blog. If you decide that you need more than one person to handle your blog, you can also increase the number of owners through this perpetual existence. The name of your business is also protected so no one else is able to file the exact same name as the name you chose for your business.
Three types of incorporated entities
There are three types of incorporated entities to choose from for your blog. The descriptions of each of the entities are:
- Limited Liability Company (LLC): An LLC is a company that is offered the liability protection of corporations but with less formalities.
- S Corporation: S Corporations do not pay income taxes. All of the income and losses of an S Corporation are passed onto the shareholders.
- C Corporation: C Corporations pay taxes on the earnings of the corporation. A C Corporation is taxed separately from the owners of the corporation. C Corporations are the companies whose names end in “Inc.,” such as amazon.com, Inc.
So, which incorporated entity should I choose for my blog?
This is a question that most bloggers want to know the answer to before making a decision. An S Corporation and a C corporation would be unnecessary unless you plan on having shareholders for your business and unless you have any immediate plans on expanding your business. When it comes to blogging, I would always go with an LLC as it is one of the easiest incorporated entities to set up and there aren’t as many forms to fill out that are required by the state or federal government.
Steps to forming an LLC
Now that we have established that an LLC would be the perfect incorporated entity for a blogger, listed below are the steps to forming an LLC:
Step 1: Become educated on your state’s LLC rules
This is the most important step. Do your own research. Be highly informed. The laws vary from state to state. Make sure you know enough about forming an LLC as well as what is required from you. If you don’t feel confident, talk to a legal professional for information and advice. They will be able to better assist you on your specific needs. You can learn about the laws that apply to your state by visiting https://www.howtostartanllc.com/.
Step 2: Choose an available business name
Do a name search on your state’s website. Make sure that the name is available because you are not allowed to file a name that has already been taken. The name of your business must be followed with the abbreviations LLC.
Step 3: File the articles of organization
This is the document that needs to be filed with your state. Some states call this document “certificate of organization” or “certificate of formation.” However, most states will call this document “articles of organization.” The filing fee will be listed on the articles of organization. The filing fee varies based on the state you live in, but it is usually anywhere from $50 to $100.
Step 4: Obtain an Employer Identification Number (EIN)
An Employer Identification Number is like a Social Security Number for your business. An EIN is required to open up a business bank account, to hire employees for your business, and for federal and tax purposes. An EIN is obtained from the IRS after the articles of organization has been filed with the state and your LLC has been formed. Click here to apply for an EIN on IRS’s website.
Step 5: Open up a business bank account
Opening up a bank account for your business is extremely important. This bank account is what separates your personal assets from your company’s assets, which will in turn protect your personal assets from liability.
There are many benefits to forming a Limited Liability Company (LLC) if you are a blogger. If you plan on hiring employees — such as writers, designers, and editors — or if you plan on selling products through your blog, you should think about incorporating your blogging business by forming an LLC. Many bloggers tend to sell informational products, such as ebooks and video courses, on their website. Depending on how much money you earn through your blog, you may benefit from reduced taxes if your business is incorporated.
I hope this article helped you decide whether or not you would like to incorporate your blogging business. There are many good reasons to do so. However, If you are not sure about what you want or need, please seek the advice of a professional who you can share your business plans with. This article shares my personal experience with forming an LLC; however, what works for me may not be what works for you. If you have any other questions regarding forming an LLC, please leave a comment below.
Disclaimer: The information in this article is for informational use only. It should not be taken as legal advice. Before relying on any information given in this article, please consult with a legal professional to discuss your business plans.