The Business Side of Blogging

This is the piece of blogging for profit, as a business, that makes a lot of would-be bloggers nervous. Understandably. 

But, it doesn’t need to be complicated. Until you are a heavy hitter (hopefully, in time) the business side of blogging can be kept fairly simple.

The single most important thing to keep in mind is satisfying the IRS that you are indeed running a small business. 

Keeping the IRS Happy

Owning a small business can be advantageous when it comes time to file your taxes.

[Before I proceed…no, I am not an accountant or an attorney. Whatever suggestions I offer are strictly from the knowledge and experience acquired from having owned several small businesses. Be sure to consult with an accountant and/or attorney for specifics for your own situation. Initial consultations are usually free and you may not need anything more than that initial consultation.] 

Since most business related expenses can be tax deductible, this could be helpful when it comes to tax time. 

Your business-related costs such as domain name, hosting, theme, add-ons, logo, camera and/or video equipment, and ongoing expenses such as supplies (including yarn, hooks, etc), Pinterest or Facebook promotions, purchased patterns, etc., may all qualify as tax deductible. If a space in your home is used exclusively for your business (yarn room; office) that can be tax deductible. And it all adds up!

LLC Needed?

And no, you don’t need to be incorporated, or even be set up as an LLC to take advantage of tax breaks. You can file as a sole proprietor using your social security number (no FEIN…federal employer identification number, or EIN, employer identification number, needed) and still take tax deductions. 

The tax forms used are surprisingly straight forward. 

One of the easiest ways to show that you are indeed a small business and not just someone trying to pass off a hobby as a business to take advantage of tax deductions, is to set up a business bank account.

That is super simple. But let’s start at the beginning…

Registering your Business Name

Once you determine that you want to set yourself up as a small business, you need to register your business name. In most states this can be done locally at the county level. Typically you complete a simple one page form indicating your “assumed name” or DBA (doing business as), what the business is, your address and that’s it. In my county this is handled at the County Clerk’s office and costs all of $9.

You might be required to file your intent to start a business with your chosen business name by running a legal notice with a local newspaper. The newspaper office handles everything. All you need to do is take your paperwork from the registration office and hand it in. They create the legal notice (classified ad) and run it as required (in my area it’s run for 3 weeks). This was the costliest part of registering the business name. $99 in my case.

After the legal notice is finished running you are given your business certificate. All nice and official and very cool! 

Business Bank Account

Now you can open your business bank account. That requires your business certificate. It’s as simple as opening a regular checking account. You want to keep your personal and business accounts separate for convenience and accuracy and also to show the IRS that you are set up as a business.

LLC Myth

For whatever reason, there is a myth surrounding small business start ups that it is better if you set up as an LLC. The myth is that this affords your personal assets a magical cloak of protection from litigation. No. Not really.

The limited, so-called protection is easily “broken”.  The piercing of the veil, as it’s called, usually occurs when a vendor (or even bank) requires you to sign a “personal guarantee” that renders you personally liable for any business expenses incurred by your business. For a small crochet blog or crochet business this shouldn’t even be an issue.

This is all information I got from my business attorney when I owned a small retail franchise years ago. But, again, I would urge you to get direction from a professional.

State Level Registration

You should also find out if you need to register with your state tax office and local government offices.  Just Google small business registration and your state name. If you do it’s usually nothing more than a one page form.

Self Employment Tax

Lastly, you might need to pay quarterly, self-employment tax. I’ll copy/paste straight from IRS.gov:

“As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording “self-employment tax” is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040. But in some situations your loss is limited. See Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) for more information.

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions (PDF).”

These are the basics you need to set yourself up as a legitimate business. It can seem intimidating at first glance. But don’t let this stop you from enjoying all the fruits of owning your own small business or running a blog for profit! The rewards far outweigh the initial paperwork!