Chapter 8
Taxes The single most important thing that you must deal with when selling your site is taxes. It's more important than finding a buyer! It's very very important for you to have a tax strategy in place before you sell your web site. Bear in mind, I'm no lawyer or accountant and I'm not legally certified or responsible to give out tax advice. I'll say it again. Having a tax strategy in place is the single most important issue you must face when selling your web site. You will be coming into contact with large sums of money, and unless you have a plan ready beforehand, the majority of that money can, and probably will, go straight to Uncle Sam. Believe me, I've found that out the hard way! The single, self-employed individual pays just about the highest, if not THE highest amount of taxes in this country. Not only do you have to pay regular income taxes, but you also have to pay a self-employment tax. If you don't watch yourself you could easily and immediately lose over half the money (or more) that you bring in from the sale of your site. This is a very real dilemma, but one that can be completely eliminated with a little careful planning. The easiest solution is to not be a single self-employed individual. Forming your own corporation is easy and inexpensive. If you form a corporation you are no longer self-employed, but are an employee of your corporation. Right away you eliminate the self-employment tax. If you then take the money you receive from the sale to better your company, you could end up owing zero in taxes on the entire amount. Corporations are allowed all kinds of deductions and things of that nature (consult your CPA they'll know best what to do). Anyone can form his or her own corporation for very little money. The actual filling fees are usually around a hundred dollars (check with your Secretary of State). You don't need fancy office space or lots of employees either. You can form a corporation with only one person (you) and your corporate offices can be your house or apartment.
I discuss this in further detail in my book: "The Beginners Guide To Starting An Internet Business". Of course, I must give this disclaimer. Consult your professional CPA and/or attorney before embarking on any tax strategies and before forming your own corporation. Plus lets face it. It's easier to sell a site if you are Mr. John Doe, President of YourCorp Inc. than it is as some guy named John Doe. You seem more professional and may be able to get past secretaries easier ;) Consult a Certified Public Accountant (CPA). These guys are fairly cheap and are worth their weight in gold. They work with all sizes of businesses. Many work just with small businesses. So don't worry! They're happy to have your business. Finding a CPA was a big deal for me. I was nervous and didn't know what to expect. Now I have 2 and I'm always happy to write out their checks. They save more money for me in taxes and things like that then I ever pay them. Find one! Start a relationship! Get to know them and explain your situation to them. The better they understand your situation the better they can help you. A corporation, even a self-employed individual, has many tax forms and such to fill out. The piece of mind that I get from knowing that my CPA is handling that stuff and that I'm not messing them up is invaluable. So, just to recap. Have a tax plan in place before you sell your site. Uncle Sam gets his fair share of your money, don't help him out more than you have to!
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