[fwfats]

I operate a web design company, but I have yet to choose a business entity. I am stuck between incorporation and a sole proprietorship. I am not concerned about the liability issues, because I have contracts for all projects. I plan on taking my tax money to invest in the exposure of my business. I plan on making between $750 and $2000 monthly, from my web design services starting May 1st. I want to know what entity would be the best as far as tax write offs goes (ex. computer, software, traveling out of state, gas used to drive to meet w/ clients, flyers, business cards etc...).

Thanks in advance......

[Catalyst]

sole proprietorship

[Jafar]

Definitely corporation! If you run your business as sole proprietor, then all the profit you make is basically your income and therefore its taxable. If you run a corporation all the profit you make could be trasfered to you as a sallary which is an expense and therefore its tax deductible. and there is also the liability benefits which dont concern you but still... Im currently starting my own business so I dealt with this issue

[Catalyst]

Jafar, on 03 March 2011 - 10:16 PM, said:

If you run a corporation all the profit you make could be trasfered to you as a sallary which is an expense and therefore its tax deductible.

...and then you pay income taxes on your salary, thus not saving you anything in the end. Plus depending on the state you're in (like CA for example) you may have to pay yearly corporation fees, CA's is $800 / yr or a percentage of the corp income so you end up paying even more money to the govt. There are benefits to a corp, but avoiding income tax isn't one of them, and the liability protection really needs a more complex type of corp than an individual would usually form (C corp vs S corp vs LLC), then you've got stricter book keeping laws, and a mess of other requirements that go with it. You may eventually decide to restructure as a corp, but if you're just starting out give yourself a few years as a sole P first.

[Jafar]

Catalyst, on 04 March 2011 - 01:28 AM, said:

...and then you pay income taxes on your salary, thus not saving you anything in the end. Plus depending on the state you're in (like CA for example) you may have to pay yearly corporation fees, CA's is $800 / yr or a percentage of the corp income so you end up paying even more money to the govt. There are benefits to a corp, but avoiding income tax isn't one of them, and the liability protection really needs a more complex type of corp than an individual would usually form (C corp vs S corp vs LLC), then you've got stricter book keeping laws, and a mess of other requirements that go with it. You may eventually decide to restructure as a corp, but if you're just starting out give yourself a few years as a sole P first.

I guess that also depends on your location. I had to go with corporation due to a naming law in NY. As a sole proprietor, you have to operate your business either under your name or use a word that is listed in english dictionary. This means that you ll have to come up with a long name that is not registered yet, and god help us to find available domain name. this could mean a lot to your brand building. I think there are pros and cons, just like to everything. It really depends on your case and what are you after

[Catalyst]

Jafar, on 04 March 2011 - 10:58 PM, said:

I had to go with corporation due to a naming law in NY

That is interesting, I hadn't heard of that. The differences between state corp laws in surprising. Here as a sole P you can have a DBA of just about anything that isn't already in use in the state. Of course the legal name of the business doesn't have to be the what you market yourself under, you could call yourself whatever and have any good domain, you'd just need checks made out to your legal name.

[Jafar]

[quote name='Catalyst' timestamp='1299313188' post='23069']
Here as a sole P you can have a DBA of just about anything that isn't already in use in the state.

thats great, cuz obtaining a DBA costs about $40, registering a corporation costs about $270. significant difference as well...