The Business of Blogging:
In this post I’m going to answer readers questions about making your blog a business. As a CPA, one of my greatest pet peeves is “barber chair” advice. I can’t tell you how many times I’ve had to set clients straight when they start a question with ” my neighbor told me….” There is also a lot of misinformation out on the web and it’s difficult for new bloggers and side hustle businesses to sort out the good information from the bad. In this post I’ll answer your business start-up questions with answers you can trust!
Readers ask about EINs(Employer Identification Numbers):
Q Can I get an EIN personally so I don’t have to use my social security number?
A You absolutely can, and it is highly recommended. Every individual can apply for one EIN in their personal name.
Q Do I need an EIN number and need to register as a business and/or get a business license before I launch my blog? Or can I wait to see how my blog does with monetization before I do that? Or do I need to do these things before I even make a penny?
A You don’t need an EIN number or a business license to launch your blog. I do however recommend applying for an EIN number before you start monetizing your blog. It’s for security purposes more than anything else-do you really want to share your social security number with unknown parties?
Questions about Licenses and Business Entities
Q What business and legal necessities do I need before I can actually earn money?
Q Is a registered business like an LLC or an S-corporation necessary for your blogging? Is it recommended?
A A registered business such as an LLC or S-corporation is not necessary for blogging. Whether it is recommended or not really depends on your individual circumstances and where you are located (some states have minimum annual franchise fees of hundreds of dollars which is a hefty cost to incur at start-up, others have no annual fees. )
Q I’ve read that you don’t need to get a business license or LLC to start making money on your blog. I definitely plan on getting these things it just feels a bit much in the very beginning. Would operating a few months without these be fine?
A I recommend checking first with your locality and state to make sure a business license isn’t required. In most cases if you’re doing business via a name other than your own you’ll need to at least register for a DBA. You might find that filing for an LLC is just as cost effective, and kill two birds with one stone. You should discuss the pro’s and con’s of setting up an LLC with a financial professional such as a CPA.
Q How much does it cost to set up an LLC?
A The cost to set up an LLC depends on what state you are filing in, and if you hire a professional to do it for you or not. The initial state filing fees range from $45-$300, with annual filing fees ranging from 0-$800. You can use a service like Corpnet to take care of the filings, or if you prefer you can hire a local CPA or attorney.
Q Can I switch from a sole proprietorship to an LLC? If so, what do I need to know about doing so?
A Yes you can switch from a sole proprietorship to an LLC. If you’re simply organizing a sole member LLC with an existing EIN, it may be just as simple as filing LLC organization papers and updating your website legal pages. For income tax purposes a sole proprietorship and a sole member LLC are not different.
Taxes and Hiring a Professional
Q I read that I need to earn a minimum of $400 before I need to report it on my income taxes, is this true?
A No this isn’t true. If you earn income (even a dollar) it should be reported on your income taxes. Of course you can deduct your blogging expenses to offset that income earned, and can even report a loss for income tax purposes.
Q What professionals do I need to hire? How do you find CPA’s? Do I need to hire a lawyer at any point?
A What professionals you need to hire depends on what skill sets you possess. If you have experience operating prior businesses you may deem the need to hire professionals unnecessary. If you have no previous experience operating a business it may well be wise to consult a CPA for general business guidance. An attorney can assist with contracts and legal ease for your blog, or you might start off by purchasing a legal document package such as “Legal Bundle” from A Self Guru a very trusted internet attorney. A good source of finding reputable and affordable professionals is to ask others in the same business who they use.
Q My husband just told me our accountant is refusing to deduct my startup blogging expenses from 2020 because I didn’t start making any money yet, and it would therefore be considered a hobby. What are your thoughts?
A Whether you are in business or not depends on if you’ve monetized your blog yet. If you have set-up revenue streams such as affiliate links, advertising and referral income, or offer product for sale on your blog, then you’re in business regardless if you’ve actually earned your first penny. You can deduct your blogging-related expenses. If you haven’t yet monetized your blog in any way, then I’m afraid your accountant might be correct that at this point these expenses are not deductible. Do keep track of the expenses you have incurred thus far, as when you do monetize your blog these expenses will be deductible.
Q From Daphne at Freeat50.blog: What questions should you ask a l tax professional you are looking to work with in supporting your business?
A You should ask the tax professional if they are familiar with the business issues facing bloggers. These would include such items as sales tax considerations for those who sell product, nexus issues for various sources of income, and knowledge of the kind of expenses a blogger will have so that they can advise if you’re claiming all you are entitled to. If you’re using a particular software for your bookkeeping it would be good to know that the tax professional is familiar with it. I also recommend seeking a tax professional who is available to consult with their clients throughout the whole year on tax and business planning issues (some tax preparers are only available seasonally). You should also inquire about the tax professional’s credentials, I hear a lot of horror stories about so-called professionals who steal from their clients. CPA’s are policed by their professional association to prevent such occurrences.
Have questions of your own?
Do you have questions about making your blog a business? Please feel free to leave a question in the comments. For a more in-depth reply, I’m available to hire for your own business consultation. Please inquire via my contact page. Consultations start at just $100 for either a phone consultation with email follow-up, or email only consultations.