I want to start my own hosting business (reseller), the thing is I don't think I would get $100 profit in the next 6 months - 1 year. Should I still register my business? What about taxes, I live in California.
My host told me that hosting services isnt taxable because its a service.
Also, there are lots of resellers out there that doesn't really have a "company". Do u even call it a company when ur reselling?
Sorry..I just need to know about setting up an online business.
Please tell me what to do first.
I already have a reseller host package, clientexec, website, and mypaysystmes... what else do I need?
I'm not a laywer, but as far as i know, if you are going to be doing business in California, you need to:
1) Get a Business License
2) If you are going to be a sole proprietor (not a corporation) you will need a Doing Business As name
3) And YES you need to pay taxes on profits.
4) If you are collecting money from people for a service you are considered a business.
They aren't taxable in the sense that you don't have to charge tax when a client signs up. You do have to pay out taxes to the governament, you just don't have to collect sales tax. Each state has their own regulations regarding business. I would check with your state's governement web site and you should be able to find information on filing requirements. There are some companies out there that can help automate the process, but the best source is probably your state's web site.
Even if you could run the business without a license for a while - it is not legal. If the IRS would find out - you are in big trouble. Check with the state of California for details. You also want to protect your personal assetts if possible. Check if a LLC or Corporation is a solution for you. If you want a business bank account, the bank will ask for your business license.
It is normal to make a loss for a year or two with a new business. Building a business takes time and patience. Being successful one day, requires you to work professionally right from the start.
If you are doing business in California you have to pay taxes, regardless of the classification of your business.
If you are going to do business as a Sole Proprieter and plan on using a business name other than your given name (i.e. Bob Smith doing business as Bob's Super Colo) you need to file a Ficticious Business Name (FBN) Statement. And remember as a sole proprieter all profits go to you and you are legally responisble for your company's taxes and debts.
If you want to go the LLC route, you will have to pay $800 per year, plus taxes quarterly based on revenue. And you will have to file a FBN Statement.
More information is available on website linked to previously in this thread.
The benefits of going either route are myriad tax deductions, especially if your business is in the red (not "profitable") for the first few years.
The best thing for you to do, from a legal stand point, is to consult a lawer when setting up a busniness to see what will be necessary to keep yourself out of trouble.
If you do not make over $400 per year off of this, you do not have to report it, if you register as a Sole Proprietor. Also, if you do make more than that, you report it as additional income come tax time.
For more specific information, I'd contact a local attorney and/or accountant.
Originally posted by kirsche Thanks for the replies guys...
I didn't know it would be this disconcerting... Btw, I'm not trying to have a new company... I'm only doing a reseller biz.
What should I do, then?
Definition of business, from dictionary.com:
2. Commercial, industrial, or professional dealings:
Your whole point in making a reseller business is to make some money, correct? If so, that's business, and as such, you are required to take certain steps to maintain legitimacy. The last thing you want is an IRS audit or worse.
Generally, if you are doing any kind of business (reseller or not) as a name other than your personal legal name, you need to register at least an assumed name. Filing for a LLC or Incorporating will give you more legal protection and taxation options.
In any case, any income that you make personally you need to file taxes on (income tax). As a sole proprietor, which you will most likely be, whether you filed assumed name or not, you will make income from your hosting venture. This gets put onto your Schedule C tax form, usually through a 1099, but sometimes not. You can then deduct any business expenses you have (cost of reseller account, domain, other business expenses etc) on there as well.
When I filed taxes this year, I claimed all income I had from my business, and then I claimed all deductions for my business, and I had $2000 more in expenses than income, so according to the IRS, I had a net loss of $2000. However, I had about 4000 miles acrued in driving for my business (2hr trips to the datacenter, visiting my parents and working on website stuff at home etc) And at $0.36/mi, that was ~$1400 I was able to claim as an expense. So you can get the picture
Depending on where you live in California, you may not need a business licence. Licences are issued by the city that your business is in. I live in an unincorporated city of CA, and I am not required to have a business licence. All that I am required to have is a FBN. You will have to fill out a Schedule C come tax time and pay a 15% tax on all profits.