To incorporate or not to incorporate
by Sapphire (September 23, 2007)
As I researched incorporation, I started noticing a lot of remarks along the lines of:
“…which the state does not charge. Except California.”
Guess where I live. Yes, folks, to incorporate at all, even if I’m operating at a loss or put the business on hold for a few months at some point, I have to pay California $800/year or a percentage tax, whichever is higher, after the first year. A handful of other states charge $100, and the rest charge nothing. And that’s just the beginning of California’s whopping insane tax punishments for people who have the nerve to want to incorporate in this fair state. Now I understand why so many companies I’ve temped with out here were doing illegal stuff to avoid taxation. (I don’t support it - I’m just saying I get it. 
)
I’m tied to California right now because of my “day job”. It’s a damn good one, and I’ve tried to find others like it outside this region - where I am apparently unhireable. This was the point of my online earning attempts: to have some kind of regular income so I can move someplace cheap and do the net stuff full time or, if necessary, supplement it with something like waiting tables, where I work part-time, get a full workout during every shift (500 calories - who needs a gym?), have some fun and make cash. I hate working in offices.
So maybe I should wait until I live elsewhere to incorporate? I’m not sure - it depends how long I’m stuck here. There could well come a time when the $800 would be worth it. Right now, it would turn my slim profit margin into an operating loss, so I think I’ll stick with a Schedule C and sole proprietorship for the moment. I could get fancy and set up a DBA and have a sort of corporate name, but I’m not even going to bother with that at the moment. Why set up a name that’s free in Cali when I have no idea if this is where I’ll be incorporating?
Posted in Staying on Track
Subscribe to the feed or email updates
September 24th, 2007 at 1:24 am
Hi,
Just subscribed here (saw your bog on 45n5) and was wondering if you wanted to share abit more about your reasons for wanting to incorporate in the first place? As you reported it costs a non-trivial amount in many states. In a problogger type business I don’t see it being of much use … you have very little at risk.
Even a small S-corp will cost much more than its inital cost in terms of paperwork, records, extra tax details and so-forth. I had a small “brick and mortar” corporation when I lived in Colorado and it was convenient when I sold product to government offices and larger corprations … they don’t like doing 1099-R’s and other “indendent contractor” type reporting, but as a blogger most blog-oreiented business that will pay you are more set up to hire individuals.
Don’t overlook the power of a DBA … in Colorado it costs only $5 a year and allows you to tylize yourself with any buisness name you like, so long as it meets state rules … and if you move it costs next to nothing to register a DBA in another state. If you wnat to protect a corporate name you have to trade mark it or register it in every state, becuase if you are Joe Schome Inc. in CA nothing stops another person from setting up Joe Schmoe Inc in, say, Nevada.
Sorry to ramble on, it’s just that this is a much more interesting subject that the usual “what size AdSense plug-in should I use questions we seem to spend so much time with.
September 24th, 2007 at 8:33 am
My tax burden would definitely be lessened by incorporating. Right now, it wouldn’t be lessened enough to pay for all the fees. But if I ever earn what I hope to be earning, it would be.
I don’t think I need a DBA right now - I’m not trying to brand anything, and I’m not using my personal name on anything remotely public. And it looks like my CITY heaps huge taxes onto anyone who gets a DBA, too, so forget that.
I want to move more than ever.