If you run your blog as a business, one of the important decisions you must make early on deals with choice of entity. This is an important business decision for any business, not just bloggers, and it can affect how you are taxed and also your legal liability.
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As a CPA, I do a lot of (legal) tax planning with my clients so that they can keep more of their hard earned money in their own pocket. When I meet with people who are going to start a business or who have recently started a business, choice of entity is one of the most important issues that we discuss.
Although I am specifically referring to U.S. entities, some of the concepts discussed will also likely apply to entities in foreign jurisdictions as well.
I list below 5 of the most common business entities that you might consider for your blog.
- Sole Proprietorship
A sole proprietorship consists of an individual who runs an unincorporated trade or business. This appears to be the form of entity most commonly used by bloggers.
A sole proprietorship is the easiest type of business to set up and manage. Sole proprietors don’t have to file a separate entity tax return for federal income tax purposes, which may help minimize professional fees.
The big downside of using a sole proprietorship is that there is unlimited liability for all business actions and debts. Having limited liability could sure come in handy if you were ever sued. One way to minimize liability while keeping the tax simplicity of a sole proprietorship is to form a single member LLC, which is discussed below.
- C Corporation
A C Corporation is an incorporated business entity with a legal status separate from that of its owners. A shareholder’s liability is generally limited to his or her investment in the corporation. Another advantage of a C Corporation is that it can raise capital by issuing stock.
The big disadvantage of a C Corporation is that it is subject to double taxation. For federal income tax purposes, the corporation files Form 1120 and pays tax on company profits. Any dividends paid to shareholders are also taxable to the shareholder, resulting in 2 layers of tax.
Many businesses today, including blogs, choose not to operate as a C Corporation because of the double taxation issue. There are other legal entities that provide limited liability without subjecting the company and owners to double taxation. Additionally, C Corporations tend to have high compliance and administrative burdens.
- S Corporation
Similar to a C Corporation, an S Corporation is an incorporated business entity with a legal status separate from that of its owners. A shareholder’s liability is generally limited to his or her investment in the corporation.
However, for tax purposes, an S Corporation is treated as a pass through entity. This means that there is generally no entity level tax (although there are exceptions), and all profits and losses flow through to the shareholders to be taxed at the shareholder level. Shareholders are taxed on earnings even if no distributions are actually made. Form 1120S is the federal income tax return filed for an S Corporation.
Unlike many other types of entities, there are very strict limitations and restrictions on the number of shareholders allowed, as well as on who can be a shareholder of an S Corporation. If you violate these rules, you could lose your S Corp status, which could have disastrous consequences.
- Limited Liability Company
LLCs are hybrid entities that offer the legal protection of a corporation but the option to be taxed as a pass through entity (i.e. partnership or disregarded entity), meaning there is no double taxation. The owners of an LLC are called “members.”
If an LLC has more than one member, it is generally taxed as a partnership. If it only has one member, it is generally disregarded for federal income tax purposes (but not legal purposes) and taxed as a sole proprietorship. Income is generally taxed directly to the member or members regardless of distributions.
A partnership is another type of pass through entity that has 2 or more owners. There is no federal partnership level tax and all income flows through to the respective partners to be taxed at the partner level, regardless of what distributions have been made. A partnership generally files Form 1065 for federal income tax purposes.
A general partner is generally liable for all partnership debt, whereas a limited partner’s liability is generally limited to his or her investment in the partnership. There are a number of different types of partnerships.
Sole Proprietorships vs Single Member LLCs
If you run your blog as a business, you should consider an appropriate type of entity for your blog. For blogs with only one owner, sole proprietorships and single member LLCs tend to be very common choices.
In general, a sole proprietorship is the most simple and least expensive type of entity. It is very easy to create and terminate, but the owner generally has unlimited liability for all business actions and debts.
A sole proprietorship may be most appropriate where there is little risk associated with the business (or any risk may be hedged against with insurance), the business is just getting started, and profits are low or nonexistent. It may not be the best choice if the nature of the business is hazardous.
Many businesses start as sole proprietorships, but then convert to an LLC or other type of entity later on once they have grown or their needs have changed.
A single member LLC may be a little more burdensome to set up and maintain, but it generally provides much more legal protection than a sole proprietorship.
Neither has the disadvantage of double taxation or requires the filing of a separate federal income tax return.
Disclaimer: The above article is provided for informational purposes only and should not be interpreted as professional financial, legal, or tax advice. The issues involved in choosing an appropriate business entity are complex and this article by no means captures all of them. Additionally, certain laws vary from state to state, so it’s important to obtain appropriate legal and tax advice for your specific situation.
This post was written by LD, a CPA and CFP® who blogs at Personal Finance Insider. You can find out more about LD and sign up for his free personal finance e-lessons (covering all of the major topics in a good personal financial plan) here.
Should You Aim for Blog Post Quality or Quantity?
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The human mind is silly. It thinks one or the other. It thinks you cannot have it all. You can have blog post quality and quantity but you need to make a clear decision on what you define to be a quality blog post.
Quality posts do not mean 2000 to 4000 word, pillar style masterpieces. A quality blog post answers the question you asked via title or delivers on the promise you made on the title.
I do understand how Google ranks 2000 word or longer, SEO-optimized posts requiring hours of work for even skilled bloggers to write, package and publish. But Google also ranks 600 words posts. 600 word posts are quality posts. Guess what? For the 30,000 bloggers out there asking the title question, I just wrote a quality blog post because they get a clear, concise, dead on answer.
Avoid Scarcity Thinking
Any time you FEAR posts are not quality because word length is 600 words, you think scarcity, or, not enough, or, not quality. But fear is not true. Fear is illusion. I can write 10, 600 word, quality posts today to make a massive impact and to help people IF I think abundance. But if I only believe I write quality, helpful posts in the 2000 word range, I stopped thinking abundance and began thinking scarcity. I chose fear over love and abundance. Naturally, all bloggers who think scarcity either struggle, fail and quit or work like beasts just to make end’s meet. Not good.
Go for quantity and quality. Some posts may span 800 or 1000 words but you can answer most questions and solve most problems in 600 words if you have immense clarity. Seth Godin answers most questions in 100 to 300 words. You have so much more to work with. So…work with it!
Think abundance. Blog abundance.
I have referenced Gary Vee many times recently and his 2000 video interviews on YouTube. Before he landed world famous speaking gig he had a pure abundance mindset, doing videos left and right, offering quality insights on a high quantity of channels. Blogging fools would try desperately to land an interview on a TV show, pitching, fearing, worrying, striving, and wasting months of time, thinking scarcity. Gary thought abundance, seized every opportunity through interview requests from some entrepreneurs who registered zero views per video, gained massive exposure organically, and, the dude became famous through his abundance mindset.
He thought quality and quantity. He did not hold back.
I am beginning to gain massive exposure through the 5-10 guest posts and blog posts published under my name daily. I do not turn down a microphone. I also know the easiest way to become well known is to focus heavily on quantity and quality, to share the wealth.
Many bloggers would obsess over a quality post being 2000 words, SEO-optimized and all that jazz, spending 4 hours to write said post on blogging tips. Meanwhile, I just wrote and published 8 quality, 600 word posts during those hours. I am being seen helping people in 8 spots. While you are on the sidelines. Even if that SEO’ed out, 2000 word post gains massive traffic over the long term, via Google, I am gaining even more massive traffic, being in 8-10 places daily via my posts and guest posts.
Think exponential increase. Imagine my 10 guest posts building up over 365 days. That is 3,650 guest posts, 3,650 spots where I am spotted online. That is a lotta spots!
See why it pays to think quality and quantity?
How to Leave Your Blogging Struggles Behind
Exit your comfort zone on a daily basis.
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Leave blogging struggles behind.
I love blogging. Blogging feels fun, freeing and quite easy to me. But sometimes, on this journey, my feelings change a bit. Sometimes, blogging feels uncomfortable and I nudge into resistance. Fear rears its head. Mental blocks arise. Sometimes I fear running out of time or perhaps I fear wasting my time. In these moments, I have 2 choices: remain in my fear-filled comfort zone or leave my comfort zone.
I left most of my blogging struggles behind because I choose to leave my comfort zone on a regular basis. Traffic, profits, and all manner of sweet blogging success greet bloggers who feel their fears, leave their comfort zones and do the blogging task, anyway.
What Is Blogging Struggle?
Blogging struggle is doing things or not doing things based on fear. Fear drives you. You blog from a fear-based, scared energy. You avoid traffic and profit and success boosting activities because you fear the opportunities. Example; you struggle horribly to make money and drive blog traffic. I advise to begin generous, relaxed, enjoyable guest posting, to help you increase traffic and profits and success. The split second you THINK about guest posting, you feel a range of emotions, from excitement, to happiness, then, from terror, to anxiety, to a general fear of wasting your time.
If 2 people visit your blog daily and you see zero blogging profits now, and you say “no” to guest posting because of some fears, you will likely struggle horribly, because you avoided guest posting to stay in your comfort zone of fear.
Traffic and profits sit on the other side of fear, outside of your comfort zone. No way around that one. We all pay a fear tuition doing freeing, success-promoting, uncomfortable things. I remember when Zac invited me to guest post on Blogging Tips. Fear invaded my mind. Would he reject my posts? How about if he hated my posts? What if I wasted my time? Would I be able to follow all the rules? Would he criticize me? Of course Zac is the nicest, kindest, friendliest iconic blogger on earth. He REALLY is, guys. He is an exceptional human being. But fear is irrational, distorting the truths of love, harmony and abundance.
I had to feel all those scary, intense fears, and keep blogging anyway, to write and publish my first few guest posts here. 800 plus guest posts later, I am still going strong. Why? I left my comfort zone those first few times and instantly began leaving blogging struggles behind.
Exit your comfort zone every single day. Do something that scares you. Do something that tests your limits. Publish a 4 paragraph long comment on a top blog, even if you fear:
- nobody is listening
- nobody is reading comments
- nobody will click through to your blog
- you are wasting your time
- the comment won’t get published
This happened to me recently. I spent 15 minutes writing a 9 paragraph comment on Pro Blogger. But Disqus suffered some connection problems and prevented me from publishing the comment. I feared I wasted 15 minutes. But after feeling and releasing the emotion, I let it go, moved on, and devoted 10 minutes to writing and publishing the comment later in the day, when Disqus was working.
Struggles happen if you choose to blog mainly from fear.
Success happens when you nudge into these fears, toward your blogging fun, taking inspired but uncomfortable action on a daily basis.
Go for it!
Exit your comfort zone.
Leave your blogging struggles behind…for good.
Focus on Things More to Leverage Your Blog Quickly
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What is the relationships guy talking about?
Blogging is a people business, right?
Blogging is one part people and one part things. Seriously. I learned this recently because if you depend 100% on people to build your blogging success you cannot possibly scale to massive levels. But if you do focus on things more, like email lists, and blogging platforms, you become less dependent on people, and also, your leveraging potential goes through the roof.
Email List Example
Let’s look at the famous email list. It is a thing. After you publish a blog post, you write a few words, include a link to your latest post, and after clicking a button, email the post to 10, 100, or 10,000 people….or more people. In a split second, you reach 10,000 human beings. Using a thing helps you leverage your presence like mad. Awesome.
But imagine if you only reached 10,000 people by mentioning people in your recent post, and tagging them on social media. Humanly impossible, of course. Let’s say you depend on even, 50 people, to promote your blog post, by mentioning them and tagging them. Linking to and tagging 50 bloggers takes a lotta time. Minimum, even for a 700 word post, it takes 90 minutes to 2 hours – or longer – to go the tagging and mentioning route. Do you see the problem of depending 100% on people and friendships to build blog? You run out of time. Meanwhile, sending your post to 50 email subscribers takes 3 minutes to send the email and literally, a split second to actually publish the email, at the click of a button.
Using Things Effectively Leverages Your Presence
Using email lists, blogging platforms for guest posting and certain tools leverages your presence fast because eventually, you run out of time trying to leverage your presence solely based on grabbing the attention of fellow bloggers. Plus you are at the mercy of humans, and building a fear-based attachment to fellow humans leads to misery because humans change, humans get too busy to promote you, and humans unfriend other humans.
I am for making blogging a people and things business. I have learned this lesson the hard way over the prior 2 months. Befriend people and enjoy the process, but if you want to leverage massively and sprint up the exposure ladder, tap into the convenience of technology by using things to reach more people fast.
At the end of the day, it is about helping more people freely. Use things – aka technology aka inanimate objects – to help people more freely and to help more people, too.
Exit Human-Obsessed and Things-Resistant Blogging Circles
I used to be part of blogging circles 100% reliant – virtually – on human beings, and heavily resistant to things. But none of these bloggers leveraged to big time, super successful levels. These bloggers railed against bots and joked of not using or being a blogging cyborg. All seemed funny. But on agreeing and following their advice I soon learned how incredibly difficult it becomes to grow a successful blog being 100% attached to and dependent on human beings to build the blog. Humans change. Things do not. Plus you cannot leverage humans like you leverage things.
While all these folks complained about emails and automating, they played so small that reaching next level success proved to be 100% impossible. But, I observed how using things like systems and tools will help you reach huge, targeted groups of people in minutes or even seconds. See the email example above.
Instead of complaining about or resisting tech, why not use things to make life easier, to leverage your presence quickly and to reach a huge, targeted group of human beings so you succeed and so people get what they want?
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