Need tax advice for a profitable hobby. Should I form an LLC?
March 5, 2010 8:11 AM Subscribe
I run a website that in recent years has started to generate a lot of income. I earned around $13,000 in 2009 with $9,000 in expenses (mostly server bills). Most of that 13k was taxed at 28% however, and my expenses were subject to the 2% rule. I was dinged with a nasty tax bill this year that I want to avoid next year. I'm wondering if forming a LLC makes sense from a tax perspective for me. I live in Maryland by the way.
posted by rq to Work & Money (18 answers total) 4 users marked this as a favorite
Given my circumstances, I need to know whether I should get advice from an accountant or a tax lawyer. I'd rather not get both since I don't have much money to work with and I feel like most of the steps for forming an LLC/filing taxes I can do myself. I just need a professional's advice and opinion to make sure I'm not making any stupid mistakes.
That being said, I have a list of general questions. Maybe there are others I should ask?
- Will I pay less in taxes if I form an LLC? What tax rate would LLC income be subject to if it's less than $20,000?
- Do I have to worry about self employment taxes if I don't plan on paying myself with income from the LLC?
- I was planning on forming the LLC in Maryland. Is there any reason not to?
- How exactly do I transfer ownership of the website to the LLC? Is it just a matter of updating the whois information?
If anyone knows an answer to any of these questions that's great. Are there any others I should be asking?