I am just getting into the affiliate marketing... etc // my question is when would it be necessary to set up an official business with number etc .. right away or only if you actually start earning money from it?
As an ex-accountant, but not a lawyer: You can easily operate as a sole proprietor. No federal ID number required. You use your ss#. You report your income/revenue and expenses on a Schedule SE (SE = self employed) form that goes with your 1040. You will pay income tax (based on your overall tax bracket) plus self - employment taxes (15%) that go towards your social security account.
One other thing that's easy to do: Set up a dba (doing business as). This is a simple registration with your state. Usually costs $10. Advantage is that you can get a business checking account and credit cards with that, and that makes it very easy to keep your income and expenses separate from your personal stuff. But it's totally unnecessary and you will still be using your own SS# for all reporting. I would, however, suggest that you open new checking account and designate one credit card (or use a debit card attached to that checking account) for all business transactions. Just easier to keep track of.
If you start making a lot of money, and have assets, you should consider setting up an LLC - but that's another topic.
You will never need a different tax ID number unless you incorporate or have employees (sub-contractors or outsourcing is not an actual employee.)
One less hoop for you to jump over before you're on the road to making money, right, tamalee?
Thank u for your advice.. I guess I should have mentioned I am in Canada as tax laws might be a bit different ?? I don't know ..lol.. plus I do have another local business I also have which is set up properly with business name etc but it is a small garden centre... so totally unrelated to online business ... except for setting up its website etc. I wasnt sure if I should get business set up strictly related to online affiliate stuff also .. ? lol thank u
Hey Jeanette, just a question about your advice regarding a tax ID. Someone advised that I get one, which I did, even though I'm a sole proprietor. I like having it because I don't have to give my SS number to every little affiliate program on the planet. I'd like to know your thoughts on that, if you don't mind.
I am guessing you like having a EIN number because it may reduce the risk of ID theft? If that is the reason, then I have mixed thoughts.
On one hand, if that makes you feel more comfortable and helps you sleep at night, then it's well worth getting. No reason not to, really.
However, the truth is that your SS# is all over the place - more than any of us realize. Ex-employers, every job application you've ever completed, doctors and dentist offices, credit cards, real estate transactions, brokerage accounts, checking account applications, loan applications, some states require it when you get a driver's license - it's everywhere. And given a bit of time, effort, ingenuity, the ability to use the computer and $50, a crook can find your social security number. Believe or not, some states have public records (including court records) that include a SS#.
And consider this, too. You've given all those affiliate programs access to your money when you arranged for direct deposit in your checking account or paypal. I'm more sensitive to that information than I am about my SS#. A crook who has the info to deposit has the info to withdraw, too. (Yes, I know you can usually arrange for a paper check, but many networks charge extra for the checks and often have a higher minimum for payout. I'll take the direct deposit and take my money now, thanks.)
All of us need to be aware of ID theft. But we all need to understand that there's really no way to assure that it won't happen to us. This is why I go online about 3X per week and visually check all my checking accounts and credit card accounts. And it's also why I get a copy of all three of my (and Jay's) credit reports every January. I don't pay for the scores, I just get the detail and make sure it's accurate.
(The three credit agencies are required by law to give you one copy of your report each year for free. If you want the score, you have to pay a bit more, but there's really no need for the score unless you plan to apply for a loan or if something was wrong with your report and you want to double check that they have fixed it properly. The free report website is www.annualcreditreport.com. You can get all three reports there for free as well as your credit scores if you want to pay for them. Note: this is not the same as the over advertised freecreditreport.com with that stupid guy singing stupid songs. That site charges a fee, but I'll bet they have an affiliate program.)
In the end, it's a personal decision. But remember, the IRS calls it an EIN = Employer ID Number. If you are not an employer, you really don't need this. (exceptions applies to businesses that are incorporated.)
BTW, I've had to have 4 credit cards cancelled in the last five years because of fraudulent charges. But other than that, I've never had any major identity theft problems. I keep meaning to get ID Theft insurance (not Lifelock) so that if it ever happens, I won't be the one fixing the whole mess - the insurance company will.
You're absolutely right, the info is out there if someone wants it. The company I work for has an EIN, which we give out over the phone to anyone who asks. It's the company owner's SS number (from a time when that was the norm, I assume) so anyone with half a brain could do some serious damage. The point is, it's impossible to protect yourself from every threat.
I do prefer to have an EIN, however. It cost me nothing, and gives me some small sense of control I guess.
Good advice about keeping an eye on all your accounts, too. My husband is so on top of our credit card accounts that sometimes I'm not even home from the store yet and he's calling me to find out what I bought. I can't imagine using those old paper statements to reconcile accounts anymore.
Thanks for your response, Jeanette. I appreciate your insight.
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When do you make it an official business?
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