c. S-Corporation. Last but not least, the corporation.
In the entrepreneurial world, most people, if forming a corporation, are going to go with the “S” corporation. It is a bit more complicated than an LLC but can be a tax saver. Again, mega important to talk with your accountant or a tax attorney. In this case, you definitely want to have an accountant that you are working with regularly.
I’m going to break this down very simply but not in full, because when you want to form a corporation you really need to sit down with both a lawyer and an accountant. In general, the corporation itself does not pay federal income taxes. What happens is that the corporation’s profits or losses are passed down to all of the shareholders (shareholders are part owners in a corporation). The shareholders then report the profits or losses on their own individual tax returns. If you are an employee or perform a major service to the S-Corp, then you will receive a salary that will be subject to the regular employment tax rates. This salary must be “reasonable” in comparison to your industry and your region. Any other money that you receive on top of your salary is a profit and is not subject to the employment tax rate (subject to a much lower rate).
For example: you form an S-Corp and salary yourself at $50,000/year (which is considered reasonable for where you live and what you do). If your company earns $100,000 that year, only the $50,000 of your salary is subject to the self-employment tax rate while the other $50,000 is not! If you were an LLC, all $100,000 would be taxed at the self-employment rate.
Disclaimer: some states do tax an S-Corp like a regular C-Corporation. Some states also charge an additional franchise tax.
Corporation have lots of rules, requirements and filings. For example, it can only have 100 shareholders and they all must be US citizens. It must hold annual meetings and keep meeting minutes; it must file annual reports and file much more formation information tax returns. It must have a board of directors and officers (note: you can play every role — president, vice president, secretary and treasurer). Basically, make sure you have a team of people to remind you about all of these requirements and making sure everything is getting filed when necessary.
2. Website Must-haves
a. Website Terms & Conditions. Got a website without terms and conditions? You are setting yourself up for potential problems. Protecting your company is super easy because all you need are terms and conditions. This acts as a contract between your business and all site visitors. Depending on the type of business you have, terms can vary, but the essence is that the terms protect your company from potential legal action by visitors to your website and puts visitors on notice that you, as the website owner, own all of the content on the site — get those copycats to go away!