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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118780
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Tina, I hope you are doing well. Me and my wife are planning

Customer Question

Good morning Tina,
JA: What state are you in? It matters because laws vary by location.
Customer: I hope you are doing well. Me and my wife are planning on opening a small online business (Amazon and Ebay) and would need some advice. We"ve been looking into the option to run it under a sole proprietorship at the beginning to see if our idea can be successfull. Before selling anything online, we would need some advice about the impacts of such a business. We are based in NY
JA: When was the business formed? Has it been registered with the government?
Customer: It is not formed and nothing has been sold yet. We are just in the first stages of evaluating our options.
JA: Anything else you want the lawyer to know before I connect you?
Customer: yes, how and where do we have to form a single proprietorship and what legal requirements does this bring with it
Submitted: 2 months ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 2 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
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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Customer: replied 2 months ago.
Thank you very much for your answer. Very infinitive so far.
Nevertheless, I still have a few questions on it, especially on the tax topic.If the profit (sales - expenses) have to be listed on my tax return, which and how taxes (%) would I have to pay on them? Are there any limits to this when it comes to profit? Are business expenses such as lap top are diductible as well?
Would seller fees such as ebay or amazon be deductible?
When would I have to wire the sales tax to New York State? One a month, a quarter, a year?Thanks
Expert:  Law Educator, Esq. replied 2 months ago.

Thank you for your reply.

Taxes on profits depend on your total personal income, it can be anywhere from 24%-28%, you need a tax professional to examine your taxes to make that proper determination. Depending on how much you are making you may need to file quarterly estimated taxes or you can file them at the end of the year. Again, you need a local tax accountant to review everything to make the proper determination.

The computer, your internet service provider costs, your seller fees are all deductible as business expenses.

As far as sales taxes you need to file with NY DOR and set up an account with them and then you would pay sales tax collected ONLY ON SALES WITHIN NY on a monthly basis. Sales outside of NY the buyer is liable for paying any sales taxes to those states or Amazon has a sales tax program to handle that sales tax issue for vendors on their site.