Webmaster Forum Rules | Posting Guide | Contact Us | Testimonials | Contributing Geek Program | Advertise on Geek/Talk
Welcome to the GeekTalk Webmaster Discussion Forums from GeekVillage.com

Click Here To Register. It's Free!

Go Back   geek/talk: Signature-free discourse for serious web publishers > YOUR PERFORMANCE: Website Promotion, Marketing and Growth > Business Principles
User Name
Password
Register FAQ Calendar Search Today's Posts Mark Forums Read

Reply
 
Thread Tools Display Modes
Old 07-31-2001, 02:29 PM   #1
jokaroo
Registered User
 
Join Date: Mar 2001
Location: Toronto, Canada
Posts: 166
Default Claiming Taxes & Bank Accounts

Hello, I currently run Jokaroo.com with one other person. I was just checking up on the consquences of not paying taxes. By the time tax season comes along, our team will all be over 18 years of age. If we make over the minimum tax deductable limit, do we have to file taxes?

Also a quick other question. We are a licensed business as well, but what exactly are the benefits of a business bank account? From what I see, it's better to have seperate personal accounts and avoid the steep service charges that business accounts have. Right or wrong?
jokaroo is offline   Reply With Quote
Old 07-31-2001, 03:00 PM   #2
Lil_Red
Registered User
 
Lil_Red's Avatar
 
Join Date: Dec 2000
Posts: 1,579
Default

Technically, you are supposed to file taxes even if you make less than the minimum. If you make over the minimum and do not file taxes, you could end up owing Uncle Sam some serious penalty money.

Your business should have it's own bank account. I'm not sure what steep service charges you are refering to. Our bank charges pretty much the same whether it's a business account or personal account.

I would strongly advise that you make an appointment with an accountant to get your finances in order. Also pick up a copy of Quickbooks and start tracking your business finances properly. It will save you a lot of grief and headaches in the long run.

I guess you will need to decide - is this a business or a hobby. If it's a business then you will need to run things as a business.
Lil_Red is offline   Reply With Quote
Old 07-31-2001, 06:39 PM   #3
Steve_S
I am a Contributing Geek. Are You?
 
Steve_S's Avatar
 
Join Date: Aug 1998
Location: Las Vegas, Nevada, USA
Posts: 5,224
Default

Age is not a consideration on weather you pay taxes. If a child star of age 12 earns income someone on planet earth must pay taxes in the USA. This could be mom and dad, the Corp, the LLC, the subchapter S and a zillon other people or entities.

Iv'e never done business with any "company" who doesn't have a "business checking account" nor do I intend to start.

Along with the record keeping advantage of placing all your income and exspenses through a business checking account their are other advantages:

1) Image enhancement with your customers
2) Audit defence. No account and it's a hobby. Hello audit, good by money.
3) Establisihng "a credit record" under the business name

On a state by state basis it will be different but to obtain a business account you will need a DBA (Doing Business As) or some sort of Corporation/LLC paper work.

These always require "publication/notice" duplicate search, small fees paid to your local clerk, business license, and such. You take all these papers to your local bank and then they examine them to see if you qualify for a business account.

I'm not an attorney or accountant so like "Red" said, see your professionals for advice.
Steve_S is offline   Reply With Quote
Old 07-31-2001, 08:10 PM   #4
JonPKibble
Member.
 
JonPKibble's Avatar
 
Join Date: Apr 2001
Location: New York
Posts: 209
Default

Actually, I disagree with Steve a bit.

Having had quite a bit of experience in the field of sole proprietorships (mostly with MLM, but my site as well) I know for a fact that usually all you need to do is use your personal account. For sole proprietorships, with zero or a couple employees, this is all you need. Doesn't have to be complicated. Most webmasters I know go this route.

As long as you are keeping track of all business expenses and income somewhere, with careful records (Credit card receipts for those purchased on credit, returned checks, and cash receipts for those with cash) this is good enough.

Getting a business account is what you gotta do if you decide to incorporate. Incorporating is something you might consider if you become very large, simply because of the tax benefits it offers (Pay taxes later instead of immediately, putting profits into company earnings and paying yourself a salary - which you pay taxes on immediately, but the accumulated earnings, later).

If you are dealing with many advertisers, using a business name might be worthy. But for most internet publishers, unneeded extra paperwork. Sole proprietorships and partnerships work just fine with your own personal accounts, as long as you're keeping records for income and expense.

But a disclaimer - I am not an accountant, only a student with a B+ in basic accounting So always ask your accountant, as Steve said.
JonPKibble is offline   Reply With Quote
Old 07-31-2001, 08:30 PM   #5
Lil_Red
Registered User
 
Lil_Red's Avatar
 
Join Date: Dec 2000
Posts: 1,579
Default

Jon,

Gotta disagree with you on this one. Even sole proprietorships should have a business account and a DBA or else they are a hobby. It is crucial for a business to be able to show it's assets separate from the individual.

Getting a business account has absolutely nothing to do with incorporation. I have a friend who does contract work who got a DBA and a business account to make himself appear professional to potential clients. No business wants to do business with someone who is a hobbyist.

As a rule, we do not do business with "companies" that are not businesses. If you do not do the groundwork to make yourself a business then you are a hobby according to my business law prof and my tax accounting prof.
Lil_Red is offline   Reply With Quote
Old 07-31-2001, 08:37 PM   #6
JonPKibble
Member.
 
JonPKibble's Avatar
 
Join Date: Apr 2001
Location: New York
Posts: 209
Default

I do not work with large businesses. I contract ads from other sole proprietorships. So I don't care if you wouldn't contract me or not.

As far as hobby vs business goes, according to the IRS, to be considered a business and not a hobby, all you have to do is make a profit every 3 of 5 years. That is what MY accounting prof said.

There is no groundwork necessary to start a sole proprietorship. I'll give you proof. If you join an MLM, you are essentially starting a business, since you are an independent contractor and not an employee with the MLM company, the IRS treats you as a sole proprietorship business owner.

If you start a website and work affiliate marketing, it is exactly the same.

If you want to be considered a business and not a hobby, all you have to do is turn a profit for 3 out of 5 years. This rule is there so people cannot abuse the tax advantages of a home based business, when they are not treating it as a business.

I certainly treat my website as a business and anyone who knows me or does business with me knows this. And as I said, since I am a rather small site in the big scheme of things, I work with sites about the same size of mine when getting advertising deals. My co-registrations have been sold out lately as a matter of fact. My newsletter ads get sold out 25-50% of the time. And pretty much everyone I know that has a website runs their site the same way, except they do not keep nearly as good accounting records as I do (income/expense).

To be a business, it is never required to fill out any paperwork. Actually , even if you do fill out the paperwork the IRS will still treat you as a hobby unless you turn a profit 3 out of 5 years.

So you might want to go ask your professor to be a little more clear, or better yet, just ask the IRS.
JonPKibble is offline   Reply With Quote
Old 07-31-2001, 09:11 PM   #7
Lil_Red
Registered User
 
Lil_Red's Avatar
 
Join Date: Dec 2000
Posts: 1,579
Default

Tsk, tsk Jon - getting a little hot under the collar there. I'm glad your method works for you but it's not necessary to get condescending when someone has a different point of view from you.

I know quite a few people who have web businesses and non-web businesses. Every last one of them has a DBA whether they are a sole proprietorship, an LLC, or a corporation. They keep all their personal stuff separate from the business stuff.

Correction, the IRS will downgrade a business to a hobby if they do not show a profit in 3 years. This almost happened to my previous employer but they reincorporated under a new name to avoid being downgraded.
Lil_Red is offline   Reply With Quote
Old 07-31-2001, 09:16 PM   #8
JonPKibble
Member.
 
JonPKibble's Avatar
 
Join Date: Apr 2001
Location: New York
Posts: 209
Default

I am not being condescending.

I am giving you my experience.

The people you know probably have been doing business longer and realize the advantages of keeping separate bookkeeping. I certainly do not deny the advantages of doing what you suggest.

But for the newbie, or non-businessman entrepreneur/weekend entrepreneur, sometimes simplicity gets the job done fine. 90% of the people I know that run websites do not file any papers. Of course most are not serious about their business!

I myself plan to incorporate within the upcoming year for tax advantages.

And yes, what you said about being downgraded is exactly what I was talking about (I am not an accounting major so my description might have not used the exact terminology).

Thanks for the info.
JonPKibble is offline   Reply With Quote
Old 07-31-2001, 09:55 PM   #9
mydomainspy
Registered User
 
mydomainspy's Avatar
 
Join Date: Jul 2001
Location: Milwaukee, WI
Posts: 13
Default

Lil_Red: I didn't see where Jon was being condescending. I guess this is how flame wars get started.

FWIW, Jon's post was essentially correct and most businesses in America are sole proprietorships, operating under the owner's legal name.

There is NO legal requirement to file a DBA (if required by your state) or open a business banking account. However, you obviously will have to live with having checks written to you as 'John Q. Public' and business expenses paid on your Green Bay Packers themed checks

Accurate expense and income records are essential. As far as deducting expenses related to this type of businesses, the IRS provides a safe harbor which states that you must make a profit 3 out of each 5 consecutive years. However, even if you don't it's not an automatic denial of deductions...you must be able to demonstrate that you are actively pursuing profit and support these activites with proof of advertising, marketing, etc.

Now, whether you will do business with individual sole proprietors operating under their legal name is up to you. However, just about every major affilate program on the web seems to not have a problem with sending checks to individuals that provide their SSN.

Best Regards,

Rob
mydomainspy is offline   Reply With Quote
Old 07-31-2001, 09:58 PM   #10
JonPKibble
Member.
 
JonPKibble's Avatar
 
Join Date: Apr 2001
Location: New York
Posts: 209
Default

That last part never occurred to me.

Most affiliates just supply a name and SSN, this is probably the vast majority of affiliates. So most people do just operate this way.

But I think what he was getting at was that anyone who wants to do ad contracting with big companies should be prepared to look professional, which I agree with.

However, just looking professional alone won't do it. However if you are a growing site, it is something to consider. Right now I myself am fine operating under my own name. But when I reach 1 million susbcribers it might be a different story.

Jon
JonPKibble is offline   Reply With Quote
Old 08-01-2001, 12:57 PM   #11
Borga
Registered User
 
Borga's Avatar
 
Join Date: Jan 2000
Location: Ajax, Ontario, Canada
Posts: 59
Default Re: Claiming Taxes & Bank Accounts

Quote:
Originally posted by jokaroo
Hello, I currently run Jokaroo.com with one other person. I was just checking up on the consquences of not paying taxes. By the time tax season comes along, our team will all be over 18 years of age. If we make over the minimum tax deductable limit, do we have to file taxes?
Getting back onto the original question for a second here... Jokaroo, yes, you have to file taxes. You're in Ontario, right? Even if you're under the $7,000ish basic exemption, file them anyway. You won't have to pay anything, but you'll be establishing RRSP contribution room (18% of your earned income) which will be valuable to you later in life. Plus you'll want to file so you can get the GST credit and maybe even an Ontario tax credit.
Borga is offline   Reply With Quote
Old 08-02-2001, 01:53 PM   #12
jokaroo
Registered User
 
Join Date: Mar 2001
Location: Toronto, Canada
Posts: 166
Default There we go...

Well what I am hearing is that I better file for taxes! But when you file for taxes in Ontario, if I do not have enough business expenses to cover my total gross income, won't I be taxed on that amount?

How can I get away without giving a cent to "Uncle Sam" and beable to file taxes? Wouldn't I have to claim more business expenses then income? Since April my partner and I have kept a good drawer of receipts and invoices that relate to business... I assume thats the correct thing to do.

Now where is that number to my account??
jokaroo is offline   Reply With Quote
Old 08-02-2001, 02:39 PM   #13
Steve_S
I am a Contributing Geek. Are You?
 
Steve_S's Avatar
 
Join Date: Aug 1998
Location: Las Vegas, Nevada, USA
Posts: 5,224
Arrow Please pay your fair share

<But when you file for taxes in Ontario, if I do not have enough business expenses to cover my total gross income, won't I be taxed on that amount?>

I don't live their but I think it's a safe bet that YES, subject to what "Borga" said which looks like great advice.

Just a few thoughts that folks never think about untill it's to late.

1) Your "filed" returns are required by most lenders to get a real estate loan. AND, yes they have ways to tell what you did and if your documentation is valid. How they do this is an issue that I prefer not to discuss. Ive' reviewed thousands of returns but I am not a professional qualified to give tax and or legal advice.

2) Business credit and or a relationship with a wholesaler often require your "returns"

3) Just suppose you ever want to sell your site/business and I'm the buyer Play nice but remember in some cases I just might ask for your "filed" tax returns.

4) Do you have children? Given the cost of education your kids might someday need a "student loan" which often requires returns from Mom and Dad.

5) Often heard in the bar: "My accountant said it was OK to write off my yummy little pooch/dog which sits by my side when I work. So I deducated $$$xxx as a business exspense. CAREFULLY examine your returns and you will see that you are the responsable party and only you. Your tax person generally has zero liability for what you put on your returns. Their are some exceptions to this for Public Corps and such but I'm really talking about sole proprietorships.

6) Often heard in the bar: I wrote off this or that and wow, I didn't have to pay any taxes. I even wrote off "Miss Cleo" since she told me I was going to make a ton of cash. Typically, a given tax authority has x numbers of years to audit your retun. So, the fact that "you" filed with "fuzzy" numbers means zilch.

7) Does anyone remember Al Capone, the famous "Mafia" person and why he went to jail?

Good luck!

Last edited by Steve_S; 08-02-2001 at 02:47 PM.
Steve_S is offline   Reply With Quote
Old 08-28-2001, 05:49 PM   #14
jokaroo
Registered User
 
Join Date: Mar 2001
Location: Toronto, Canada
Posts: 166
Default

Thanks for all the input. Tax season is on its way and I will be taking your advice. Thanks again.
jokaroo is offline   Reply With Quote
Old 09-06-2001, 12:52 PM   #15
batcavenet
I am a Contributing Geek. Are You?
 
batcavenet's Avatar
 
Join Date: Sep 2001
Location: Batcave
Posts: 186
Wink Taxes

my advice is to buy a lot of things for your business - like computers / etc and write off your office space (even if home office), your advertising, travel if permittable, maybe even utilities and supplies. One year I was stuck with a 7k tax bill and got it down to about 1800 with the help of a good CPA - a CPA is worth every penny! good luck to you


JDT
batcavenet is offline   Reply With Quote
Reply

Bookmarks

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is Off
HTML code is Off
Forum Jump

Similar Threads
Thread Thread Starter Forum Replies Last Post
US bank accounts?? Help. ralphch Making Money with CPC and/or CPM Programs 0 02-14-2002 01:15 PM
Battle of net sales taxes continue darnell Making Money with CPC and/or CPM Programs 1 11-07-2001 10:57 PM
Free AdvertisingResults.Net Accounts suresk Archives of old posts from Let's Barter/Trade, Buy, & Sell 2 06-27-2001 10:24 PM
Paypal now accepts bank accounts from USA and AUS GuruChoc Making Money with CPC and/or CPM Programs 3 04-27-2001 01:49 AM
Taxes m3rcury Making Money with CPC and/or CPM Programs 11 07-07-2000 08:35 PM

Please support our advertisers. They ensure our survival.

All times are GMT -5. The time now is 05:54 PM.


GeekVillage.com is copyright © 1998-2014 iOnline Web Design. All rights reserved.
Powered by vBulletin® Version 3.7.4
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.