As someone who owns multiple businesses, I’m often asked how I go about structuring my entities and accounting for the income I bring in from affiliate marketing. Needless to say, there is a plethora of different options to choose from. With so many different ways to properly and effectively operate your affiliate business, a lot of affiliates can’t figure out the most strategic way to lay it out on their own.
I’m not an accountant. Nor am I an attorney. I’m actually far from the two. I’m just a glorified serial entrepreneur. Therefore, how I structure my affiliate business is merely one outlook on the many options available.
Business or Personal
The first decision you have to make is whether you want to earn your money through an incorporated business or through your own personal name. If you’ve never owned your own business before, I always suggest routing all of your affiliate income through to yourself simply to avoid the startup costs of incorporating a business and the headache of creating bank accounts for it.
However, if you’re feeling ambitious and want to make your affiliate operation look a little more professional, I suggest incorporating as an LLC (Limited Liability Company). All of my companies are registered as LLC’s in the State of Florida.
LLC vs. S-Corp vs. C-Corp
One of the most immense benefits of operating as an LLC is its lightweight nature and how easy it is to run. Aside from the benefit of not being personally liable for anything having to do with the company, you are taxed just as you would a sole proprietorship. You are able to take monetary distributions from the business whenever you please and manage the business funds like they are your own.
An S-Corporation is different from an LLC in that the law requires that all employees receive a “reasonable salary” throughout the year. This creates more management and expenses for you as the business owner.
C-Corporations are taxable entities. This means that the income the business generates is taxed as it is earned instead of when it’s distributed to the owner(s). C-Corporations also utilize the concept of “dividends,” which means that, as an owner, you get taxed twice for your portion of the profit once it’s disbursed.
If you plan on being an independent affiliate with no partners or additional team members, your best bet is to generate income through your own personal name or set up a simple LLC with the state you reside in.
If you are trying to assemble a large team with a number of employees, an S-Corporation might be your best bet.
Finally, if you plan on managing a handful of employees and issuing stock options to each of them, it will be best to register your company as a C-Corporation.
No matter what you decide, be sure to hire an experienced business attorney and accountant to keep you in check and abiding by the rules of running a successful business.
Logan Lenz is the Founder of Endagon. He also helps aspiring entrepreneurs at www.loganlenz.com.
Article source: http://feedfront.com/archives/article003243