Hi, everyone! I’m less than year into starting social media consulting free-lance. I kind of fell into it when my first client offered to actually pay me for my help. What a new concept in my world of non-profit volunteerism! For almost a year now I’ve been collecting PayPal payments from multiple clients as word of mouth has spread. I’m still traditionally employed, it’s just on the side. The amount I’m making is comparable to what I did as a babysitter, but I’m wondering what are the necessary steps for this budding business. Should I become an LLC? Has anyone done that and how does it work/what does it cost? (I’m in Maryland.) What else have you done to incorporate yourself as a microbusiness with no employees beyond yourself and no public office, no P.O. Box, nothing formal?

Thanks!

Sarah

http://www.sarahprager.com

@sarah_prager

If I understand your question, starting a social media business is no different than any other type of consulting business.

There are tax advantages to an LLC, just like there is an S corp or staying as a sole proprietor. 

I would recommend that if you’re taking this seriously you talk to a local tax attorney or CPA. Ask your friends or local business people you respect on who they chose and why.

Good luck!

@sarah-prager 

Hi I am new to the Social Media experience & trying to learn & gobble up as much info as possible. Also, I have been a practicing CPA since the mid 90′s so maybe we can scratch each others back. To answer the question in your post I wouldn’t do either an LLC or Corporation wait & see were the business goes. LLC’s & Corps in general just protect you personally. Ex: If someone were to file a law suit against your corp they can’t touch your personal assets. As of now & with your line of business, I doubt your exposure to lawsuits are very big.

You will have to keep track of your income & expenses & file a Schedule C with your 1040 when you file your 2012 taxes.

BEWARE of self employment tax it always trips up new business owners. It is Social Security & Medicare Tax that would show on your W-2 & your employer has to match it. You are now self employed and it will basically cost you 13.3% of your net profit (not gross income) above & beyond your normal tax rate.

There are some tax advantages of different types of business entities that I can get into more depth if you want to contact me (513-607-4686) but I don’t see to much at risk or to many tax advantages from the way your post described your business just concentrate on growing & if you do start getting into a full-time status with several clients etc then you may want to talk to a CPA in your area

I’ve had these questions and you did a great job of answering them, thanks! @david-c-jones-cpa