I have several websites which are all more of a hobby. If I simply make enough money to cover hosting costs I'd be delighted. At which point should I consider starting an LLC for one or all of my sites?
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Businesses and Hobbies are taxed differently, and both have their benefits, so this is something that I'd talk to an accountant to, and do what fits your needs more and do what makes life easier for you. The jist of it is this. If you make money doing your hobby, which you've already said that you do, then you are allowed to deduct the difference of the cost to get to that income up to 2% of your total income. So for example if you pay 1200 bucks in costs for equipment, design, etc over a year, and you are able to make 1000 via your communities then difference, 200 bucks is available to use a hobby itemized deduction. You don't have file taxes any differently, and it's an easy thing to do. You are however still personally liable for any lawsuits or judgements filed against your websites. Even if you have disclaimers, etc, a lawsuit could be a huge financial burden. Conversely, as an LLC, your loss is 200 dollars, which not only offsets other taxable income, but you would also be able to deduct cost of equipment as well. This is a more tax efficient option, as well as being a shelter for your personal wellbeing in case of any legal issue arises. The negatives are that of course, you are now having to file taxes for a seperate entity for something that you admittingly want to keep as a hobby. |
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Frankly, I would not worry about it until you are making more than $500 per year or so. Think of it this way, the IRS has no way to find or audit you and unless you trigger some red flag on their computer screen by making large unaccounted for deposits in your bank account you'll fly below the radar pretty much forever. It's a risk equation and unless you have a lot of money coming in, it's a very low risk. |
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