Thursday, October 4, 2007

Web developer with lots of questions

My answers to Peter are embedded below. Think that makes it easier with so much going on in his correspondence.
-- June


Hi June,

Great site. Thank you. I must say, a lot of info - possibly too much to find all the questions I have. Try the "search" box in the upper left of the screen. It may help.

I am a web developer. I started an LLC (sole proprietorship) in Ohio last month. I have couple of clients I make websites for (some for over 2 years now) and as expected I have some questions about what my new "status" brings:

1) When I receive checks, they all go to my business account. I read on your site that as a sole proprietor I am not an employee but rather I AM the company itself. Therefore: How do I pay myself? You don't pay yourself. You may take money whenever you like. You "income" is the profit your business has at year end. Can I just take the money from the same bank account, do I write myself a check, or what? Write a check to yourself or to cash.

2) How do I pay taxes? Read this post Estimated Taxes I have an EIN, I have no employees, and I have some freelance developers doing some work for me at times - I consider them as vendors, not employees.

3) What are the benefits of having an accountant, Jack Smith has a web making program. Why does he need a web developer? I do not do much business really, one or two checks a month come in... I read somewhere that in order to comply with the Limited Liability part, I need to separate my business and personal expenses. If you are an LLC you must have a separate checking account and a separate credit card to maintain limited liability.This comes together with Q#1: If I pay myself, transfer money to my personal account, or buy personal things directly with my business credit card, does that in any way change the LL part of the LLC? Yes.

4) How do I know if I should charge my customers a Sales Tax?? Every state is different. Call your state tax office.

5) What can you do for me, besides making my life easier by answering the above questions, or at least pointing me in the right direction? Contrary to most laymen's thinking, tax preparation for indies -- and many other situations -- is not simply putting #s on specific lines. There are often many choices for the same kid of deduction, there is different tax treatment for similar situations, there are different kinds of pensions for indies depending on income, age, family situation.


Just like Jack Smith doing his own website. For some Jacks it might be OK for other Jacks it might mean a big loss of money.

Thank you so much in advance! You are very welcome.

I
can tell by your questions that you would benefit from the info in my book, Self-employed Tax Solutions. You might want to check it out.


All best, Peter, OH

5 comments:

Philippine Web Developer said...

Hi,

I am based in the Philippines and have a U.S. based client. He was asking me how taxes will be handled. Does he have to pay any U.S. taxes? I know from my end all I have to pay is my persoanl income tax, but I don't charge that to clients.

Anonymous said...

I will definitely check your book out :) Thank you for responding to my questions !!! - Peter

June Walker said...

Peter, you are most welcome!
-- June

June Walker said...

Hello Ramon,

Yes, your US based client must pay tax on income he earned working for you.

-- June

philippine web developer said...

Thank you very much.