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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I am about to start a media website that will be selling access

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I am about to start a media website that will be selling access to videos and photos (no physical merchandise) and will have ad revenue. I need to know the best way to structure the business to allow:

1) the lowest startup and maintenance costs. I have in mind things like business structure, and incorporating in Wyoming where the cost for that is low.

2) operation of the company from anywhere in the world without running afoul of tax laws, local, state, and national.

Have done my own taxes for several years, so feel free to use jargon, but I know little about business taxes and international tax law, so please be complete. I will be the only one to own and operate the company, and am very early in the planning stage, so I don't have to undo anything yet.

Thanks in advance!
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question. If you are in the United States, you can operate your website and not have to worry about taxes abroad. This will change, of course, if you physically locate your operation in another country. For sake of simplicity, I would keep your servers and your operation in the US.

I would suggest an LLC over a corporation. For your purposes, if you are the only member of the LLC you will fill out schedule C of your tax return just as if you had no business structure.

If you want a corporate structure, I would suggest an S-corporation. The S-Corporation is also a pass through entity in that you pay tax on your 1040, but you will also fill out an 1120S for the company to calculate what needs to be taxed on your return. With the S-Corporation you will have to pay yourself a "reasonable salary" and pay employment taxes on that salary. On Schedule C (for the LLC) you will pay self employment taxes on your entire profit. So, if your profits are substantial the S-Corp will offer you some relief on self employment taxes.

To be an S-corp, you would incorporate then elect S-status with the IRS. CLICK HERE for the form to do that. Keep in mind that only US persons can be members of an S-corp. If you ever took on non-US shareholders, you would lose S status and would be a regular C-Corp.

I would incorporate in the state that you live in, or Delaware. Delaware is a very popular state and there's no state income tax for businesses so you would only have to worry about your portion of New Jersey taxes (you will have to pay tax on your salary and dividends in New Jersey). CLICK HERE to read about incorporating in Delaware.

Please let me know if any of this is unclear, or if you require further clarifications. Thanks again for using JustAnswer.com

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO XXXXX ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12486
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 7 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

i have no preference for llc vs corporation, as i do not know enough about either to form a good opinion. i know that llc and s corps allow pass through of earnings, whith no corporate taxes. even tho deleware has no business tax, it would still not prevent federal corporate taxes, if i were a c corp.


 


since i plan to physically be outside the us, but leave the web hosting to a us based company, and process payments through a us based processor, i am still not clear on how the corporate ornllc structure will


affect or not affect me. i am not sure whether i will need to file some sort of ukrainian tax form if i live there, or if a corporate:structure changes my filing process or lowers my overall tax burden. do i need an ein? or just a tax id since there is no physical inventory or employees?


 


sorry about the fragment below, im on a tablet and i cant seem to grab it to delete it...


 


thanks a million so far!


 


affect or not affect me. i am not sure


 

Expert:  Megan C replied 1 year ago.
If you are a citizen or a resident then you will benefit from the LLC or S-Corp structure because you would have pass through taxes. You will have a US tax liability anyways, even if the site is abroad. However, with US web hosting and server and payment processors, you have a US-based income source.

If you are a nonresident alien, I would incorporate as a C-Corp so that you just pay tax at the corporate level. If you're outside the company then you would not have a tax liability to the US.

If you have a single member LLC you don't need an EIN. A corporation would need an EIN to process tax returns.

As for the Ukranian tax issue - you would need to contact a professional in the Ukraine to determine that. We can only speak to US related issues.

You owe federal tax regardless of your structure - it's just a matter if you pay it individually or at the corporate level.

Hope these clarifications help you -feel free to continue replying until you are satisfied with your answer. Have a wonderful day and thank you for using JustAnswer.com

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO XXXXX ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**


Customer: replied 1 year ago.

death and taxes... right? :-)


 


i am a us citizen. it seems an even split between s corp and llc. they both avoid the double taxation of c corp + personal taxes. why do you reccomend deleware vs wyoming for incorporation? can i get a bank account in the business name if i am an llc os s corp without an ein? i suppose only a taxpayer id is necessary for a bank account in the business name? the location of bank account has nothing to do with location of corporation? i need to file a return for both the state where the corporation os and where the bank account is (if different) even if i am not in the country? is the lack of business taxes moot if i am an s corp or llc since the income passes through? if i live in dubai, would i fie taxes as a resident of the state where my company is registered? or where the bank account is? do i need to collect sales tax if i have no physical merchandise? the product is access to something like a bunch of you tube videos (i can clarify more if you like)

Expert:  Megan C replied 1 year ago.
I will get back with you in a few minutes. Please standby.
Customer: replied 1 year ago.

your replies have been incredibly fast and super specific so far. thanks a lot.

Expert:  Megan C replied 1 year ago.
I recommend Delaware for the reasons in the article that I linked to. It's cheap, and their business law structure is one that many corporations find favorable. If you are going the LLC route, you could go with any state you wanted but I would do either Delaware or your home state.

You could certainly do Wyoming - it's cheap, and there's no business tax there either. ONe isn't better than the other so whatever you find easier is fine. I'm sorry there's no magic bullet or magic state to incorporate in - but these do not have state taxes and that's important to you if you are going to work remotely.

You can get an EIN for banking purposes only, if you so choose. Many banks will require this. When you fill out your application for your EIN, check the box that says the EIN is for banking purposes only.

If you are in Dubai, if you have a DE or WY business, you will have no state tax. I saw that you are in New Jersey on your question, so I assumed you lived there. The state of taxation is where the business is either organized, or is operating. A website is typically seen as operating in the state of organization, or the state where the person running the site lives.

You will not collect sales tax unless you sell actual services or goods. Simply having a website with ad revenue does not create a sale tax event. You can CLICK HERE to read more about sales tax issues on the web. I do not believe you will owe sales tax. CLICK HERE to read more.

Thanks again for the opportunity to assist. Please let me know if I can be of further assistance.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO XXXXX ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Customer: replied 1 year ago.

i have been wrestling with technical issues with the tablet i am on, sorry for the delay.


 


so far the llc vs s corporation question seems to be personal preference from your point of view, as there does not seem to be any difference as


far as taxes go, is that right?


i currently reside in nj, which is why it was in the profile, but that is temporary. this meanse taxes filed in nj (where the operator is) and


also in DW (where the corporation is), and when i leave the us, i only file in DW? either way i need an ein to get a bank account in the company name. the sales tax references contrasted a physical product with a service. from a tax standpoint is buying access to a series of videos purchasing a product (intangible videos) or a service (the service of providing access) i have done a lot of looking and could not find anything difinitive on that.


 


W?


 

Expert:  Megan C replied 1 year ago.
Thank you for your question. When you leave the united states, you are still a resident of the state in which you resided directly before you left - so you would still have a tax liability to New Jersey if you filed an LLC or S-Corp (because you pay tax as an individual).

In terms of taxes -The S Corp or LLC would be your best bet. Since you are a solo gig, the LLC might be simpler for you to handle simply because you're used to doing your own taxes. The S-Corp offers the opportunity of lower self employment taxes, but at a cost of keeping up a corporation, filing quarterly payroll returns, and the like. The LLC - particularly if you are overseas - may be your simplest bet.

Delaware has no business tax, so you will not file a return there. You would simply keep your registration with the state current, but there's no income tax.

Your website would be more of a "subscription" than the purchase of videos. Think of it like NetFlix - you aren't charged sales tax on your NetFlix subscription and what you are doing is very similar.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO XXXXX ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Customer: replied 1 year ago.

one last thing - is there an approximate break even point in annual revenue between llc vs scorp and the corporate tax and self employment tax?


 


there likely is no way to even guesstimate this, and i recognize any answer would be a ballpark with a range to it, but you have been so awesome so far i:figured i would ask.

Expert:  Megan C replied 1 year ago.
You are very correct in that there is no way I could guestimate that. I also consider time as money - your time is worth money. Even if you are performing accounting functions on your own, that takes time away where you could be earning money. Time would be a big factor in the S-Corp. Time to do the payroll reports, time to do the extra tax return.

I would just go with the LLC. That's just me, though.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO XXXXX ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Expert:  Megan C replied 1 year ago.
Thank you for the positive rating. Please remember me the next time you have a question. Simply enter "MyVirtualCPA" in the subject of your question, and it will be routed directly to me. Thank you again for using JustAnswer

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