Don’t Be the Troublemaker: How to Make Money on the Internet and Stay Legal

On December 8, 2011, wrote:

More and more entrepreneurs are beginning to take advantage of all the Internet has to offer. For most companies, the Internet is a huge player in whether or not they will be successful. For others, it is the only player.

In other words, many entrepreneurs are starting a small business that is online-only. If you run a blog or a website designed to help consumers, chances are that most of your business can be done through this online website. Before you know it, advertisers are interested and vendors want to be a part of the action. Eventually, you can have yourself a very profitable online business.

Other online companies, however, get blindsided by the dollar signs and forget about the legal steps they must take in order to keep that money. After all, an online company takes a long time to turn profitable. When it finally happens, it’s exciting. But it’s important to put that excitement on hold and consider some of the ways to stay legal with your newfound business.

Tips to Staying Legal with an Online Business

There are really two major things an online business owner needs to consider: income and self-employment taxes. I hate to be the bearer of bad news, but these taxes are bound to eliminate of few of those dollar signs you were once so excited about. Nonetheless, it is important to stay legal so as not to get in serious trouble with the government. Consider these two kinds of taxes and why they are sometimes taken for granted.

Income Taxes: It may seem obvious, but sometimes people forget that they have to pay income taxes if they’re making money online. (Or they think they don’t have to.) It is easier to claim the money you make when you work for an employer because your paycheck generally already has income taxes taken out, but this is not true when you earn a salary on your own. Therefore, you must keep track of everything you earn and set aside money each month for income taxes.

Self-Employment Tax: This is an extra tax you owe on top of the income tax. If you’re considered an independent contractor (which you are if you make money online independently) you must do a little math to decide what you own on this tax. In general, it equals to about $14 for every $100 you earn.

One way that independent contractors save money is by claiming expenses on all of their online income. In other words, anything used for your business is tax-deductible—computers, office supplices, gas to and from your office, etc. If you keep all of your receipts for these types of items, you will be able to write them off come tax time, thus reducing the amount of taxes you need to pay.

Although it may seem like you need to take out small business loans when all is said and done, it is really not too different than if you were working for an employer. You have the extra tax, but you are able to write off any expenses for your business.

About the author: Amanda DiSilvestro is a writer on topics ranging from social media to credit card processing. She writes for an online resource that gives advice on topics including document software to small businesses and entrepreneurs for the leading business directory, Business.com. (Photo Credit: mamapop.com)


Stay Connected, Subscribe to the Lakeshore Branding blog feed via RSS, email and you can follow Lakeshore Branding on Twitter!

What do you think? Share your thoughts by leaving a comment.

2 responses to “Don’t Be the Troublemaker: How to Make Money on the Internet and Stay Legal”

  1. Simon West says:

    People are just realizing that making money online is still subject to the same taxation laws as making money in a real live business. This blog really serves its purpose as a great eye-opener to those who don’t realize this simple fact. Well done.

  2. Brian Siu says:

    I prefer to put up an online business because that’s the easiest and most efficient way to earn money. Internet business became a trend since the start of social media.

Leave a Reply

Your email address will not be published. Required fields are marked *