Q & A: Should Affiliate Marketers Set up an LLC or DBA for Tax Purposes?

Question: when launching an affiliate marketing blog should I set up an LLC or remain as a sole proprietor for tax purposes?

This question was submitted by one of our mentoring students who is just beginning their new business as an affiliate marketer. One of the first steps to ensure your success is to decide on the right business structure for your endeavor. Will it be a DBA doing business as a sole proprietor or an LLC limited liability company and what are the advantages and disadvantages of each business structure option.

While we are professional affiliate marketers and Internet digital executives we are not legal nor tax experts so this is information to begin your research process. Be sure to check with your tax advisor and attorney before making your final business structure decision.

The difference between DBA and LLC

All businesses in America are by default considered a DBA meaning that the business owner i.e. the John Doe is doing business as ABC affiliate marketing agency. The name of your company is considered your tradename for all your business transactions. Be sure to create a name that communicates your branding message to your customers and is memorable.

A DBA is also called a sole proprietorship. This means that the individual who operates the business is also the owner or proprietor. One of the main disadvantages with this type of business structure is that any business liability or lawsuit becomes your personal responsibility thus there is no protection for your family’s assets from business risks.

Limited liability corporations nicknamed LLC are created as a separate entity from your personal finances. The advantages that your LLC will be responsible for debts and lawsuits but you as an individual and your family will be protected.

When sole proprietor DBA is your best choice.

If you have limited assets then the simplicity of a DBA is for you. Also if the business type you are launching such as affiliate marketing, as opposed to high-risk businesses such as transportation, is low-risk DBA will suffice. As your company grows and you build up assets and expand into riskier ventures you can then form an LLC.

If you elect to be a sole proprietor you will need to fill out a DBA form and file it with your local business office. When you do this your government agency will check if that name has not been used by another business. The DBA filing is an important step in consumer protection to prevent fraud by bogus companies operating under fictitious names.

When an LLC is best for your Internet business

because an LLC gives you protection against liability, separating your personal and business assets, it is a more complicated setup then a simple DBA filing form. It works best for businesses that have sizable assets they want to have protected. Additionally having an LLC with your company name will prevent other companies from using that name so you are protecting your brand legally.

The IRS federal government does not tax your LLC instead your business profits will flow through directly to your personal tax returns.

Costs of LLC and DBA

In most states, the cost of forming an LLC is greater than that of the DBA. Thus entrepreneurs with lien budgets often start as a sole proprietor DBA because of its affordability and then later set up their LLC. We advise that our mentoring students all use this affordable and reliable LLC set up service provided by LegalZoom.

While we are professional affiliate marketers and Internet digital executives we are not legal nor tax experts so this is information to begin your research process. Be sure to check with your tax advisor and attorney before making your final business structure decision.

The difference between DBA and LLC

All businesses in America are by default considered a DBA meaning that the business owner i.e. the John Doe is doing business as ABC affiliate marketing agency. The name of your company is considered your tradename for all your business transactions. Be sure to create a name that communicates your branding message to your customers and is memorable.

A DBA is also called a sole proprietorship. This means that the individual who operates the business is also the owner or proprietor. One of the main disadvantages with this type of business structure is that any business liability or lawsuit becomes your personal responsibility thus there is no protection for your family’s assets from business risks.

Limited liability corporations nicknamed LLC are created as a separate entity from your personal finances. The advantages that your LLC will be responsible for debts and lawsuits but you as an individual and your family will be protected.

When sole proprietor DBA is your best choice.

If you have limited assets then the simplicity of a DBA is for you. Also if the business type you are launching such as affiliate marketing, as opposed to high-risk businesses such as transportation, is low-risk DBA will suffice. As your company grows and you build up assets and expand into riskier ventures you can then form an LLC.

If you elect to be a sole proprietor you will need to fill out a DBA form and file it with your local business office. When you do this your government agency will check if that name has not been used by another business. The DBA filing is an important step in consumer protection to prevent fraud by bogus companies operating under fictitious names.

When an LLC is best for your Internet business

because an LLC gives you protection against liability, separating your personal and business assets, it is a more complicated setup then a simple DBA filing form. It works best for businesses that have sizable assets they want to have protected. Additionally having an LLC with your company name will prevent other companies from using that name so you are protecting your brand legally.

The IRS federal government does not tax your LLC instead your business profits will flow through directly to your personal tax returns.

Costs of LLC and DBA

In most states, the cost of forming an LLC is greater than that of the DBA. Thus entrepreneurs with lien budgets often start as a sole proprietor DBA because of its affordability and then later set up their LLC. We advise that our mentoring students use sites like LegalZoom.

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