This Web Business IV: Business Entity Options

by Scott Kramer

17 Reader Comments

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  1. I have a pipe dream about going freelance, or even setting up my own teeny tiny web business, so I was very pleased to read this article (and rediscover the earlier ones in the series). It’s nice to see that A List Apart keeps covering all bases relevant to the webnik. While I appreciate that A List Apart is “made in America” and the majority of its audience probably hails from that nation, however, I was wondering whether anyone can suggest sources of similar business-type knowledge for non-US websters. Hint: I’m British, so any UK info will be much appreciated.
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  2. Dear,
    My name is Honza Seifert. I am from Czech republic. I have a company and make web sides in Czech. My intention is find company in America who are interested us to making web sides for them. We produce really quality graphics art for much lower money than amerivan makers can offer. If you are interested about our graphics art or web sides,please contact me .The best regards J. Seifert
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  3. If you’re in the UK then Companies House http://www.companies-house.gov.uk/ has lots of information about company law and for tax matters then I’d try the Inland Revenue http://www.inlandrevenue.gov.uk/
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  4. I was a bit annoyed by the US-centric approach of this article. i have no problem with reading an article about how to set up a business in the US, but the fact that the author never even mentions he’s talking about a specific country, and just assumes whoever reads it will be from the US is taking a very narrow view of the readership, in my opinion.
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  5. Hey Kemie, While I agree with what you are saying, it’s a little unfair. The majority here are Americans, and also that information is gonna be quite a bit different depending on which country you’re in. An American viewpoint was the right choice because it’s (more than likely) what he knew, what most others wanted, and what made the most since from where he was sitting.
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  6. “Here”? Where? On the Internet? Surely you jest.
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  7. I understand your point. The reason I don’t explain these things more thoroughly comes from a history of writing bad fiction in college. Everytime I would write a story for a class, there would invariably be areas circled in thick red marker with the letters “SDT” written next to them. SDT stands for “Show, don’t tell.” I would be explaining, for example, how a person in my story is a really bad guy and worthy of the reader’s hatred. But my professor wanted me to have the reader come to that conclusion on their own by demonstrating my character’s evilness through actions. So I got used to explaining less. In my mind, you should understand that the article is meant for US businesses because that’s all I discuss. Sorry ‘bout that. I will be more explicit in describing who future articles are meant for. I certainly didn’t mean to annoy or offend anyone. For the record, all of my articles dealing with law are only useful in the United States. The finance stuff you can probably use in any country.
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  8. Not meaning to sound too righteous about an article that on the whole was a good read… but: Just as a good web site should cater for browsers other than what “most” and the “majority” use, so too should a good web article cater for more than just US readers. Besides, never make assumptions about your users including that of their origins.
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  9. When speaking on a topic (or multiple topics as in this article) it is important to state the good and the bad, and not just the bad, which is what I saw when Scott spoke about some of these entities and business structures. All of the listed business structures are used at different times, and can be used in conjunction to create great legal protection, as well as unbelievable tax advantages. For instance, You can split your services into multiple LLC companies (ie. Hosting, Web Design, Print, etc.) and have a corporation hold all of them. So, your corporation needs a website… Have your Web Design company create it and manage it. Need brochures? No Prob. You own a Graphic Design Company that deals in print. So basically, you just spent $3,000 on a Web Site and some brochures, and your money (that is, your companies money) just went from one bank account to another. So What… So you didn’t really spend any money and you get to write-off $3,000 dollars! Also, by creating multiple entities, you create businesses that are more specialized, you can sub any work that you get through one company to another, and most importantly, you generate more exposure by creating seperate entities. Listen, bottom line is this. You are probobly a web designer/developer/whatever. You need to know a little about everything (business, websites, taxes, law, sales, etc.) but have people that know everthing about little (that meens 1 thing like taxes or law) that guide you in the right direction. To the author, I mean no ill will. You and the guys/girls at ALA take a lot of crap after spending so much time trying to help us. Thanks to all of you. A business man who owns a web firm.
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  10. One thing that is important in any venture, business or otherwise, is to do a little research before starting out. The differences among cities, counties, states, provinces, countries are significant & will greatly impact your decisions in setting up shop. One place to start, if you are in the States, is to contact your local small business center (most communities have them) and get details on steps for setting up a business in the area that you live in. The next step would be to pick the brains of your friends & collegues about parts of this that they would be able to help you with—accountants, lawyers & other small business owners would be ideal. & finally, I would recommend checking with the powers that be—those who will care whether you earn income through your venture or not & found out what their guidelines are. In the States I would check with the IRS, your state business office & any local institutions involved in collecting taxes. I cannot emphasis this enough. A few years ago I looked into setting up a small Web development firm but decided against it. I still did freelance gigs & simply submitted federal and state taxes via 1099’s. I felt fine about it all. Then I was dragged before the Philadelphia tax discovery unit & told that I owed not only city wage tax, which I could understand being liable for, but business previlege tax as well. When I argued that I was not a business, I was told that my legal status as a corporation or company did not matter to the city. What mattered was that I was generating income, of which they wanted a slice. Currently I am facing paying the missed taxes, plus a huge plenty of up to 60%. Had I know that the City of Philadelphia considers me a business, I probably would have found an accountant to take care of this stuff for me (DIY did not pay off this time) & would have charged my clients at least 10% more per job to cover the taxes.
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  11. OK, let’s say I have a Web Design LLC (A) and a Graphic Design LLC (B).
    (A) spends $3,000 on brochures with (B). (A) can write-off $3,000. Cool! But (B) have ta declare $3,000 income at the same time. So what’s the advantage of moving my money from one bank account to another?
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  12. First off, everyone read “Do your Homework” above. This is unfortunately a common occurance. Please contact proffesionals to handle setting up your company, even if you think you can do it. And if you already have set one up on your own, pay someone to look over all of your documents. Make sure your foundation is secure. With that said>>> The advantage is the ability to zero out your taxable income, which to my knowledge, can only be done in conjunction with a corporation (or with just the use of one corporation). The point of business is to make money. Lets say you profit after all expenses $110,000 for the year. Congradulations! You can now give a large chunk back because you are now in the highest tax bracket. Now, the trick is to spend all of that money and get yourself into the lowest tax bracket (or a lower tax bracket) by spending the money on assets (things that make you more money). This can be done in many ways (401k’s for business owners, realestate, etc.) If your making enough to get out of the lowest tax bracket in one year, than the money getting you out of that bracket should be invested and written off. You invest in your other businesses, and those businesses send almost all of their income to that one corp. It’s something hard to grasp, but done everyday. Just look at any fortune 500 company and see how many smaller companies they own. I even heard Time Warner paid only something like $7,000 in taxes for one year (I don’t know if it’s true). Having more than one company allows you to channel money more effectively to do this, and protects you legally in many ways. Again, you really need to speek to a CPA (not just an accountant. Acountants count and that’s about it. They are usually poor themselves just like brokers). And have an attorney that is well rounded in your needs. The firm I use has a dept. for my real estate companies, Web company, Graphic Design company, and my personal Corporation which holds all of my companies. This structure was constructed by my CPA over many years in order to give me both legal coverage as well as financial leverage over tax laws. Sorry If this isn’t the exact answer that you wanted, but to be honest,
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  13. Access a wide network of cost-effective designers (web, 3d modeling, animations, CAD, graphics ...) http://www.netbonus.netfirms.com
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  14. I found this thread very interesting. Any other clues are welcome
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  15. step up to china
    http://www.nic2000.com/?guest
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  16. Very useful. Thanks.
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  17. Basic, but needed info;
    a link list to non US resources would be great indeed.
    Marek
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