When you start generating income from your blog, you may come across people asking you to treat it like a business. For many people, the first step towards creating a blog like a company is incorporating it. However, blog incorporation remains a matter of controversy among bloggers from all over.
Here, we take a look at some of the advantages and disadvantages of incorporating a blog.
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Disadvantages of Incorporating a Blog Business
Just like anything that comes with advantages, incorporating a blog also comes with some disadvantages. Here are some reasons why incorporating your blogging business may not be a good idea.
1. Expensive
One of the most prominent disadvantages of incorporating a blog has to do with the high costs. Blogs have several differences and complexities compared to other structures, so they tend to cost more to set up. For example, a blogger will have to pay fees to establish a corporation. After creating the corporation, the fees do not disappear. Some typical costs for blogs include legal costs, state fees, and accounting expenses.
2. Double Taxation
Double taxation refers to a situation where one makes tax payments twice on the same income. With a corporation, a blogger pays taxes both at the business and personal levels. Corporations pay taxes on early earnings. When a corporation pays out dividends to its shareholders, they come with tax liabilities. Any shareholders receiving the dividends also have to pay taxes on them. However, some corporations such as S Corps and LLCs can avoid double taxation using pass-through taxation. This is where the taxes pass through the blog business to the owner.
Advantages of Incorporating a Blog
Blog incorporation is not a priority for most bloggers. However, the Fat Stacks Blog gives several reasons why incorporating a blog may be a good idea after all. Below are some reasons why bloggers should consider incorporating their blogs.
1. It Limits Liability
This is perhaps the most significant advantage of incorporating a blog. By correctly incorporating and maintaining the set corporate formalities, bloggers can avoid being personally liable for any debts related to the blog business. This means that business creditors cannot collect any unpaid debts with the personal assets of the blogger. Without proper incorporation, bloggers put all their personal belongings, such as cars, bank accounts, houses, etc., at risk.
2. Improves the Legitimacy of the Blog
When starting a blog, many people do not enjoy a big audience or platform. However, most small businesses have to start from somewhere. Regardless of the starting point, incorporating offers an opportunity for bloggers to equalize. In addition, any potential clients and partners treat a blog with more credibility. Therefore, it is an excellent opportunity for bloggers to gain an extra edge over their competitors.
When to Incorporate Your Blogging Business
Now that we know the advantages and disadvantages of incorporating a blogging business, the next question has to do with timing. Due to the complexities and costs of running a corporate structure, most bloggers prefer starting with a proprietorship and incorporating them when making money from the blog.
Here are a few questions every blogger needs to ask themselves before incorporating their blog to make sure that they are making the right decision:
- Can they afford the fees and expenses involved in incorporating a blog?
- Can they handle the paperwork associated with the process of incorporating the blog?
- Can they keep accurate records?
- How will the double taxation that comes with incorporation affect their corporation?
- Are the advantages stronger than the disadvantages?
What are some of the Business Structures for a Blog?
Blogs use the same business structures as blogs. Below are the most common business structures.
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Sole Proprietor
This is where a blogger runs the blog as a business where they are the sole owner. They do not file any paperwork with the Secretary of State. They are the sole proprietors.
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General Partnership
This structure suits businesses with two or more partners sharing ownership. It has many similarities to a sole proprietorship.
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“Doing Business As”
Commonly known as fictitious name registration, the DBA comes in handy when a business uses a different name from the entity that owns it. However, a DBA does not assume the place of a license for sole proprietors.
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Corporation
Sometimes referred to as a C Corp, a corporation is owned by shareholders.
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S Corp
Although an S Corp is a corporation, it is a special designation with the IRS to receive taxation differently from a C Corp.
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Limited Liability Company
An LLC comes with most of the advantages of a corporation without the formalities that come with a corporation. However, the taxation process also varies. It is also often easy to set up an offshore company.
Are you a blogger thinking about incorporating your blog? First, take some time to understand the advantages, such as limited liability and better brand legitimacy. Also, understand the downsides like increased expenses and double taxation. With this knowledge, bloggers can look at the advantages and disadvantages of the different business structures before choosing one.
