Anytime you’re setting up your business it’s a good idea to consider the legal and tax ramifications. Unfortunately, most blogger don’t think of themselves as “business” owners and don’t think about this important step. The good news is, you’ll rarely need to be concerned immediately because it takes a while to start generating any meaningful income. However, it’s always best to be prepared.
Let me start by saying that I’m not an attorney and I have no legal training whatsoever, so I can only speak from my own personal experience. To be on the safe side, always consult with an attorney or accountant to see what your legal responsibilities are in your locality. And these requirements often vary from state to state so be sure the person you’re consulting is familiar with your local and federal laws.
You don’t ever have to register your blog as a business entity in order to make money. You can operate it as a sole proprietorship forever if you choose. On the upside, this makes it easy for anyone to start a blog and start making money. However, it does have a few drawbacks.
As a sole proprietorship, there’s nothing that separates you and your personal assets from your business and your business assets. All of the profits you earn are yours. The drawback is, if you should incur business debts or someone should file a lawsuit against your business for some reason, your personal assets could be used to cover those debts.
For a small fee you can register your business name which allows you to open a separate business checking account and get a tax ID number if you need one. A business name, though, doesn’t create a legal entity for your business and it’s still a sole proprietorship.
If you want to separate your business and personal assets you’ll need to take stronger measures. For example, you could register your business as an LLC, which stands for Limited Liability Company, or your could register as a corporation. Each has different requirements and benefits so it’s best to consult your attorney first.
In general, you only have to pay taxes on earnings in excess of $400 per year (in the US) and you’ll also need to pay self-employment taxes. On the upside, you only pay these taxes based on your profits so if you have a lot of business expenses it will reduce your tax burden. On the downside, in most cases these taxes must be paid quarterly, in advance. Taxes vary based on profit level and location so again, it’s best to consult an accountant.