Sole Proprietor or Corporation?

[whiskas]

I'm been developing and selling apps for mobile phones. The income I'm getting from this isn't huge, but it is income nevertheless. The money is obviously coming to me from US sources. So a few questions:

- Is there a $$$ amount threshold after which I have to start report ingincome on my tax form? ie. if I make more than $1000 I have to start reporting the income?

- I'm the only one involved in this whole operation. In this situation would it be best to remain a sole proprietor or should I register a corporation? Which would be the best from a tax benefit standpoint? Some of my apps deal with sensitive information, which would be best from a liability standpoint?

- Would I be able to write off expenses such as my mortgage (it's my office afterall), my internet + electricity bills and other business expenses?

[BananaFob]

Sole proprietorship and get liability insurance will be your most cost effective solution. Generally you shouldn't incorporate unless you have liability risks of over $1M or so.

You technically need to start reporting the income when you made your first dollar.

You can write off a reasonable (1 room or so) portion of your mortgage. Take the percentage of square feet and deduct that as a percentage.

[leftwing]

I'd go corporation as its a separate legal entity and if someone ever tries to sue your company they can only take your companies assets, where as a private business they can take all your personal assets (house, car) as well as your company.

As far as I know incorporating only costs 300-700 ish. Corporations also provide a benefit come income tax season.

[BananaFob]

Originally posted by leftwing
I'd go corporation as its a separate legal entity and if someone ever tries to sue your company they can only take your companies assets, where as a private business they can take all your personal assets (house, car) as well as your company.

As far as I know incorporating only costs 300-700 ish. Corporations also provide a benefit come income tax season.

That's what liability insurance is for...

Corporations are a bitch for paperwork come tax time. Also costs more money to file if you're not doing it yourself. Most likely won't have a tax benefit at all, in fact, it's likely to be worse due to double taxation unless this is completely a side job for investment purposes.

[leftwing]

The taxes aren't any more difficult, you just have to file a tax return for the corporation (as well as a personal statement) as it is a separate legal entity; It has to pay tax on its income.

And yeah the corporation is subject to double taxation, but you also have a lot more flexibility as you can shift income/profit lowering your tax bracket and saving you money...

[Sugarphreak]

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