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If you are going to be selling only online, you can do so as a sole proprietorship, which is an unregistered business entity and you would be responsible only for charging and collecting sales tax in NY and paying it to the NY Department of Revenue. A sole proprietor
claims all income and losses on their personal income tax returns and gets no protections of the registered corporate structure as would an LLC
, S-corp or C-corp.
The LLC/S-Corp/C-corp, is separate business entity registered with the secretary of state and gets a separate tax ID number (EIN) in the name of the business. The business then provides protection from personal liability generally. An LLC or S-Corp is typically a flow through tax entity, meaning you can claim profits losses on your personal tax return or you can elect to be taxed as a corporation
. The corporation pays its own taxes and would pay you as shareholders
a dividend and/or a salary for working for them.
Generally a small online business is done as a sole proprietor or LLC.
Also, if you are only doing online business and no storefront in NY, you could register your LLC out of state in a more friendly tax and operation state such as Wyoming or Nevada (you can register online with various services and they provide you a mail address there as well for a registered agent). You would then avoid the NY franchise
tax fees on your LLC or S-corp and only would file your profits/losses on your tax returns.
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