What's the best kind of corporation to have for this online business?

[mrmax]

I want to set up a business structure so that I can sign up with CCbill and take credit cards and affiliates.

I live in Mass. I dont know if I need to be incorporated, get an LLC, an S corp, a C corp. A friend said I should get an LLC so I was leaning that way.

I saw this on legal zoom and it seemed like a good cheap solution: http://www.legalzoom.com/limited-lia...y-pricing.html

Any advice on what type of business is best for running an online business, taking affiliates, etc?

[Titanmen]

You are asking for trouble if you think you are going to get good legal advice from an online forum. Spend the $500-$1000 and get some real legal advice from a real attorney. If you have any assets whatsoever you are risking everything you own and any future income if you make the wrong decision. This is too important a decision to make from online suggestions.

[mrmax]

Thanks, Id just like to know what other people here have done in terms of filing their business, and why they did it.

[abostonboy]

Marc,

I would suggest you do the following:

1. Goto Amazon and grab a book on the different ways that you can setup a Corp.
2. After doing that, get some legal advise.

Now, you mention that you want to do it to be able to process through CCbill. Here is some advice - Don't think of it that way. Look 2-3 years down the road. Will you want additional capital? Will you want to sell? Will you expose yourself to greater risk than now? Will you hire employees? The list goes on and on. That's why it's going to be REAL hard to get advice on a board. Everyone's business is unique. I will even go out on a limb and say that some may say how great their LLC is versus a S-Corp and may not even know that in their case a S-Corp maybe better. Or vice-versa.

Just one thing to keep in mind: If you go with a C Corp make sure you fully understand the tax liabilities.

[abostonboy]

p.s. Because you live in MA is even more reason to get some legal advice. Just because you live in MA doesn't mean your Corp has to be in MA. Something to consider with a tax attorney.

[nickbaer]

WHile having an Attorney is absolutely necessary, your 0next visit should be to your tax preparer.

Anyone in business should have a CPA do their corp and personal taxes. Not an H&R Block, but a real CPA company, whose name is a mile long list of the partners' surnames.

The CPA will know what's best from a tax standpoint in your State, or give you a couple of options that your Attorney could then help you choose from, based on other legal issues such as: your other assets, other obligations, "marital status," other partnerships you're signed to, etc.

Before you go too far, you might want to consider that there are 10 or so states in the US that do not have state income tax. Why do you think Bill Gates lives in the State of Washington??

If you're too complicated for just a CPA, possibly the CPA, Attorney and you should conference to find the best fit for your situation.

Some states and cities have friendlier attitudes to First Amendment businesses, as well.

[basschick]

as far as i know - and i'm not an attorney nor do i play one on tv - an LLC has the simplest requirements. it's not just that it's easy to get one, but it doesn't require monthly meetings, officers, etc, in the same way that some other types require. 2 popular places to incorporate are delaware (cheap) and nevada (few requirements).

you don't need a corporation to process with ccbill or epoch, btw - you can do it as a sole proprietorship.

and i agree with lloyd and Titanmen - each business has such radically different requirements that there's no way to know what would fit your business.

[abostonboy]

Some states and cities have friendlier attitudes to First Amendment businesses, as well.

. Yeah, a few states give ya a tax break if you run a porn business.

[nickbaer]

A couple of those friendlier states would be California, Florida and New York.

And some of us live in Nevada for the same reason why Bill Gates lives in Washington State.

[gaybucks_chip]

The value of incorporating (or forming an LLC) out of state is limited at best if you're going to continue to live in your home state. Nearly all states require a "foreign" (out-of-state) corporation to register (and pay fees) if they are going to operate in the state. California, for example, says that if you set foot in the state once during the year to conduct business, you are doing business in the state and should register (of course, not many small businesses follow California's rules.) And the fees for registering a foreign corporation (or LLC) are, conveniently, the same as if you registered the organization in your home state in the first place.

If you're in MA, and set up a business in NV, you'll definitely have to register in MA -- you won't credibly be able to claim you aren't doing business in the state if you reside there -- and the registration fees will pretty much negate any savings from setting up your LLC or corporation in Nevada unless your organization becomes pretty big and you have a CPA doing advanced tax avoidance strategies.

Otherwise, I would absolutely echo Nick's remarks. The first conversation after you familarize yourself with the different entity types should be with a CPA (and I take Nick's suggestion a step farther and say find a CPA, and not an accountant, and find one who has some familiarity with entertainment-related businesses. The CPA can give you excellent advice on the tax consequences of each type of business and will have reasonable knowledge of the liability issues as well.

Next, you will most definitely want to spend the $ to talk to an attorney with adult experience. I've seen people get some absolutely awful advice from well-meaning but incompetent general practice attorneys.

All the time I hear people say "I can't afford an attorney" or they skimp and get a bookkeeper instead of a CPA or whatever... and it's pennywise and pound-foolish. If you can't afford good advice to start up, you need to save some more money until you can, because otherwise, you're likely to either get into trouble over 2257 violations (this is an incredibly regulated industry) or pay a ton in taxes/penalties/fines if you aren't set up correctly.

[nickbaer]

In reading the AVN and XBIZ news reports, I sense that far more people in the adult industry get into trouble with the US Govt over taxes, than legal issues involved in making or selling videos or goods (outside of drug abuse, and blatant disregard for laws regarding obscenity, postal zones where adult product is verboten, or local zoning ordinances, to be simplistic).

Any CPA will work to keep your tax outlays slim to the bone. And that will keep you in business to start with. A few hours with one will keep your cash, "your cash". They can keep your Fed and State taxes low, but don't be afraid of the Self Employment tax, which is Social Security, which is your annuity during retirement, or part of your health insurance should something happen at an earlier age.

With all due respect for Attorneys, most adult industry merchants and producers can find most of their real life business answers with CPAs over day-to-day tax issues such as buying content, or hiring consultants or contractors, or even hiring actors for videos.

You want to hire someone to design some html, or write some PHP code? Your CPA will tell you how to pay them, whether an individual or a business entity, and what type of billing record keeping you should demand before paying.

There's a group of us video producers who pay actors less than $600 per project, and there are some who pay more. That can become quite the pissing contest in debates between producers over preseumed quality of a production.

There's a tax issue with hiring people to work for you, and $600 has been the line in the sand between paying an individual and writing it off as an "expense," vs needing to fill out a 1099, and the actor a W9, and reporting the actor's name and Social Security number to the IRS in January, and getting a copy to the actor in January as well.

(Above and beyond State labor laws which may or may not deem movie actors as "employees" from the get go).

I've never had an actor in a movie be excited about putting his Social Security number in my records. Amazing how when I tell one "If you go over the $600 thresh hold, then the SS# is mandatory," the begging over dollars cools off real fast.

Every business is different, and everyone in business needs legal and accounting advice tailors to their situation, but don't forget all the business people who have failed because of screwing up their taxes... and others who the Feds got on tax issues, much more easily than trying to prosecute obscenity or other "adult" oriented interpretations of the law.

[mrmax]

Thanks for the help and opinions everyone.
The only reason I'm doing this is so sign up with CCbill and have affiliates. I know I dont need a company to do that but I should protect myself.

I dont intend on hiring employees or leasing space or getting big or anything. I'm just doing it because I've never had affiliates before and want to protect myself in case.

I've been working as an online affiliate for 7 years as an individual with no legal protection, so anything I do would be better than what I've done.

[abostonboy]

MrMax,

Go get legal advise. Seriously. I just read the last two posts and I don't want to offer my "opinion" except to say that I disagree with a few points (from experience) and would suggest you talk to someone. I know a kick ass CPA in Boston if you want a referral.

Lloyd

p.s. You say you want to protect yourself because you have affiliates? That is only one of 100's of reasons you may want to protect yourself and not really the most important of all of them.

[abostonboy]

If you're in MA, and set up a business in NV, you'll definitely have to register in MA -- you won't credibly be able to claim you aren't doing business in the state if you reside there -- and the registration fees will pretty much negate any savings from setting up your LLC or corporation in Nevada unless your organization becomes pretty big and you have a CPA doing advanced tax avoidance strategies.

MrMax,

I can give you a good referral in Boston about this issue. He may convince you otherwise. I wont offer my opinion, except to say talk to a tax attorney about this.

Lloyd

[gaybucks_chip]

It's very possible MA doesn't require you to register a foreign corporation in the state. There are a few states that don't. I can only speak for the ones where I've lived, so talking to Lloyd's guy would be an excellent idea