Fully registered legal business.

[Paul L.]

How many hosts do you think actually have a fully registered legal business and pay taxes.
With so many hosts starting up each day I wonder about this.

[ffeingol]

IANAL or an accountant, but you're taking a pretty big risk if you don't pay the taxes.

You don't have to "register" per-se (i.e. run as a sole propritor) but setting up a LLC or inc. is so cheap/easy now days, why not.

Frank

[Paul L.]

I agree and would never think of it, but I know so many kids doing hosting that all they care about is getting a server and selling hosting and they never think about the business legal side of things.

[Incognito]

When I look at the topic, I think of three areas of registration. 1-Getting a local business license if required, 2-Registering either the business name as a fictitious or assumed name and/or forming an LLC or Incorporating, 3-Reporting income on income tax returns.

What has always amazed me is the number not registering and not reporting for tax purposes when, in fact, if all allowable deductions were taken into consideration, they would not have had to pay taxes anyway. They might have even gotten a refund depending on other income sources.

[beley]

I don't really worry about anyone else's business but mine, but I think you'd be surprised how many don't even pay taxes. One day the tax man will come knocking on their door and they'll be sorry.

[RackFive]

I only have a few hosting clients, but I pay taxes because I sell computers too

[Wire]

Yes I doubt all these 15 year ols running around pay taxes.

[CompuLounge]

Most Host, do pay taxes cause if you don't you will have the IRS knocknig out your door for there money or to arrest you. :eek:

[Chicken]

Yes and trust me, they do come after your paycheck. I owed them taxes from 1997 and they docked my paycheck, even though I sent them the money (we have to dispute this -pain in the donkey), and withheld my state tax return (sent it to the feds), and took the money out of my federal return!

Basically, I'm going to find them and kick some butt, but in the meantime, they've got my money. :cry:

[alchiba]

Originally posted by Chicken
Basically, I'm going to find them and kick some butt

Lots of luck. Being an IRS agent means never having to say you're sorry. :D

[allan]

Originally posted by Chicken

Basically, I'm going to find them and kick some butt, but in the meantime, they've got my money. :cry:

I am afraid this is something that is going to haunt 15-16 year olds (and adults) that start hosting companies and don't think about taxes. The IRS is slow to come after you, but once they do....

It would suck to have to tell customers that their sites are down because the IRS confiscated their server :D.

[Sesran]

I am deducting everything.. LOL Getting an accountant this year too, not even going to try to figure this year out myself.

[Mike]

When I first started NetLuxe services 2 years ago, I was running it underneath sole proprietorship. Staff began to grow, and then I became partners with the owner of another company. Once we became partners, we became incorporated and due to large amounts of money being made, we needed to file income taxes and the like.

I think that any respectable company that has been in the business long enough (hostrocket, ventures online, mediatemple) would be incorporated at least. Personally, from a consumer's point of view, I wouldn't want to buy hosting from some kiddy site anyway. I would sacrifice the space and transfer for service and reliability with a better company.

Mike :banana:

[allan]

Originally posted by Sesran
I am deducting everything.. LOL Getting an accountant this year too, not even going to try to figure this year out myself.

I don't even do my own taxes :D. The whole process is too complicated -- I would rather have our accountant worry about it.

[Saeed]

This is very interesting. I'm wondering about web hosts that are in other countries than where they're doing business? For example, what if a web host is in Europe/Asia and they have servers in US. Couldn't they get away with not paying taxes?

[allan]

Originally posted by Saeed
This is very interesting. I'm wondering about web hosts that are in other countries than where they're doing business? For example, what if a web host is in Europe/Asia and they have servers in US. Couldn't they get away with not paying taxes?

Well, I assume they would have to pay taxes in their own country. I don't know of any government that does not have some form of taxation :D.

But no, they should not have to pay US taxes.

[RackFive]

Originally posted by Saeed
This is very interesting. I'm wondering about web hosts that are in other countries than where they're doing business? For example, what if a web host is in Europe/Asia and they have servers in US. Couldn't they get away with not paying taxes?

no matter where are you from, in all countries you have to pay taxes ;)

[alchiba]

Originally posted by Saeed
what if a web host is in Europe/Asia and they have servers in US. Couldn't they get away with not paying taxes?

I seriously doubt it. There are some countries that will just put you in jail and ask questions later when they find you holding out on them. People get very cruel when it comes to money. The best advice is professional advice.

[interactive]

Originally posted by allan
Well, I assume they would have to pay taxes in their own country. I don't know of any government that does not have some form of taxation :D.

But no, they should not have to pay US taxes.

LOL Maybe the taliban ;).

[Saeed]

That is my point. They have to pay taxes in their own country, but what if they don't have a registered company. How is their IRS going to know about their servers in US?

[jer]

My company was formed as an LLC -- contracts, lengthy operating agreement and all. I think there are a great number of companies are either run as a sole proprietorship, or aren't registered at all. The company I worked with prior to starting my own with my partners was run as a sole-proprietorship -- and I think generally the way it was run is not uncommon. I'm sure there are a number of companies who simply aren't registered at all -- though, I'm not sure how long they last (either they get out of the business, or get registered.)

As far as the tax issue -- in most countries, if you're making money and paying bills, *someone* is going to eventually know where you're getting the money.

[StarGate]

We are a legal and registered business in the country of Greece. We pay taxes to the greek state for all our business transactions.

[DarktidesNET]

How do you got about getting a legit 'Inc.' and how much do they cost?

I have been hosting for about 7 months and I am not registered. I wasn't serious about it just resold to buddies till about 2 months ago when I got booted off my reseller and forced into ded server. Now I have two, about 30 clients and want to get 100% legal but have no clue how.

Any place you can point me to on how you can get an 'Inc.' ?

Thanks.

P.S. I will pay taxes .... damn IRS is no one I'd wanna mess with.

[Chicken]

There are a few forms of business, you could go: Sole Proprietor, C Corp., S Corp, LLC, and the last 3 could be registered in a state other than the one you live in. The best advice though is to talk to an accountant (and possibly a lawyer) about it and see what's best for you.

[VoxKeysGtr]

Even before you see a lawyer, talk to your accountant as they are in the best position to advice you on where to incorporate in order to benefit your bottom line. :)

[CompuLounge]

You can go to http://www.llc.com and become an INC in your state. They do everything for you and all you got to do is fill in the information. You can also, go to a Lawyer and have them register you... I woiuld get registered and take care of everything before this coming Tax time.

To become an INC in Missouri it cost $88. Basic registration with LLC.com is $88 + $199. Which is what it would cost you to become an INC and be legal. If you have a DBA registered in your date you're legal as well.

[Altco]

I wonder how will hosts thats charging $5 a year gonna pay taxes? :)

[DarktidesNET]

Originally posted by Altco
I wonder how will hosts thats charging $5 a year gonna pay taxes? :)

Don't forget the 500mb space, 50 gigs of bandwidth ones for $20 a year.

[Altco]

$20 - taxes = approx 17.00 / 12 = still tiny profit :)

[311]

Originally posted by Altco
$20 - taxes = approx 17.00 / 12 = still tiny profit :)

What about server costs etc...?

= even smaller profit.

[Altco]

hey hey hey that is still profit you know :)

[PipeTen]

It doesn't matter where your server is, it is where your company is registered that counts as far as the tax man is concerned. We pay enough tax over here in the UK!

Why would having a server in the US (which we currently don't) make any difference to how much tax your company pays or to who?


pipeten.com web hosting (http://www.pipeten.com/)

[VoxKeysGtr]

Originally posted by PipeTen
It doesn't matter where your server is, it is where your company is registered that counts as far as the tax man is concerned. We pay enough tax over here in the UK!

Why would having a server in the US (which we currently don't) make any difference to how much tax your company pays or to who?


pipeten.com web hosting (http://www.pipeten.com/)

I think that you are taxed where your company does business and makes money. Don't quote me on this because I am not a lawyer or an accountant, but I do know that for Americans, even if you do business outside of the country, you still owe taxes in the USA. There are some double taxation treaties with certain countries where if you pay taxes in that country for business done in that country, you don't have to pay taxes on that income here in the US. But, the bottom line is, that you have to pay taxes on income. I do not know what the situation is in other countries.

This is turning out to be a good thread. I am looking forward to learning more about this from those of you that have experience in this area. :cool:

[TurtleBay]

I would suggest all business owners should have an accountant. I am a CPA and I'm getting ready to launch my own hosting business. CPA's are much more than just tax guys...we like to think of ourselves as coaches...helping our clients succeed in any way we can. If nothing else, its good to have someone you can contact when questions arise (and you can be sure they will).

John :baghead:

[VoxKeysGtr]

Originally posted by TurtleBay
I would suggest all business owners should have an accountant. I am a CPA and I'm getting ready to launch my own hosting business. CPA's are much more than just tax guys...we like to think of ourselves as coaches...helping our clients succeed in any way we can. If nothing else, its good to have someone you can contact when questions arise (and you can be sure they will).

John :baghead:

Hey John,

How do accountants typically bill. Is it like a lawyer where the initial consultation is free?

[TurtleBay]

Originally posted by VoxKeysGtr
Hey John,

How do accountants typically bill. Is it like a lawyer where the initial consultation is free?

AFAIK, it varies...I think most do the initial consult free. Unlike lawyers, who you may need relatively rarely, I like to get to know my clients, and their business, which is usually what the first meeting is about. After the first meeting, things are usually by the hour. In my case, unlike my lawyer (who charges for every e-mail and phone call), I generally do not charge for those if they are less than 10 minutes...

John

[VoxKeysGtr]

Originally posted by TurtleBay
AFAIK, it varies...I think most do the initial consult free. Unlike lawyers, who you may need relatively rarely, I like to get to know my clients, and their business, which is usually what the first meeting is about. After the first meeting, things are usually by the hour. In my case, unlike my lawyer (who charges for every e-mail and phone call), I generally do not charge for those if they are less than 10 minutes...

John

Thanks John.

Are there any ballpark figures as far as an hourly rate? Is it neccesary to find an accountant that is familiar with e-commerce or the Internet, or will just about any accountant be able to help?:confused:

[BarbaraC]

Not all countries enforce taxes on their citizens.

We in USA must pay business taxes, according to the counties and states we live in.

Tax Information for Business - IRS (http://www.irs.ustreas.gov/businesses/index.html)

State and Local Tax (http://www.taxsites.com/state.html)

[allan]

Originally posted by VoxKeysGtr

Are there any ballpark figures as far as an hourly rate? Is it neccesary to find an accountant that is familiar with e-commerce or the Internet, or will just about any accountant be able to help?:confused:

The accounting firm my wife and I use charges $150 an hour and $90 an hour for their assistant, but they are most definitely worth it.

They have saved us $1000s on our taxes over the last 5 years we have been using them -- and we always wind up with a heft refund.

[VoxKeysGtr]

Originally posted by allan
The accounting firm my wife and I use charges $150 an hour and $90 an hour for their assistant, but they are most definitely worth it.

They have saved us $1000s on our taxes over the last 5 years we have been using them -- and we always wind up with a heft refund.

Thanks for the info, allan. Looks like I'm in the wrong business...hehehe...:D

[TurtleBay]

That's about right. My rate is $95/hour, except on some things...

John

[felix220]

Originally posted by Saeed
This is very interesting. I'm wondering about web hosts that are in other countries than where they're doing business? For example, what if a web host is in Europe/Asia and they have servers in US. Couldn't they get away with not paying taxes?


No.. but the taxes may not be due in the USA, in fact won't be unless the money is earned in the USA legally. They will have to pay taxes where they take the money.. and as mentioned above, most Western countries have tax treaties to accommodate people working in a different jurisdiction from where they live.

There are a bunch of ways of doing anything tax free, but it's kinda stupid. Just pay some taxes, and use your brains so you don't pay more than you legally, or morally, have to.. you use all the things that taxes pay for, so it's a fundamental issue that you pay something into the pot.

People who make amounts of money on the internet, but ignore the societal requirement to declare income for tax, will be treated just as people who make 'undeclared' income always have been.. maybe an upgraded Tax Office dept to deal with online stuff might appear..

You don't pay tax if you don't make profit, so keeping basic records of transactions in and out, and giving them to even an ordinary, basic accountant [unchartered] will keep you on the right side of the law, won't cost too much and will make you feel good..

If you are running a real business where it matters, then I guess you wouldn't be needing help from this thread.. so to all those who haven't sorted out their tax yet.. jump to it, and don't get conned by accountants who make it all seem extremely complex.. they are only just behind lawyers in terms of the levels they sink to, to extract fees from unwitting clients.. but we need 'em God Bless their little green pens.. :)

For those youngsters who get a kick out of selling hosting plans and do it for just a few bucks, they don't make enough to warrant attention by the authorities generally, and they've been merrily spending their parents post tax income anyway.. all things in perspective..

[PipeTen]

I think it is good for small businesses to be able to trade across the world and only pay the taxes in their own country. It would get far too complicated otherwise.

When huge corporations get to exploit this loophole I think it needs addressing. As is with the case of AOL in the UK being able to undercut all the UK ISPs because they don't have to pay any VAT to the UK customs and excise. This is unfair competition as there are only a limited amount of companies that can try and compete and could result in AOL getting a monopoly on the market if the few other UK ISPs that exist weren't prepared to make a loss.