Domaining is a Real Business for some people. For others it is just a game. Once you decide that you are serious about making money then it is imperative that you treat your domaining activities in a business like manner.
The first thing to think about is to prepare a business plan. This means looking forward towards the day when you hopefully will have money rolling in and are making a profit. There are a number of legal matters to consider on commencing a business – whether it be on the internet or offline.
The two most important and related aspects to consider are choosing the right business structure and how you manage your taxes. If you plan on making real money then operating as a sole proprietor is inappropriate. It is inefficient in respect of tax – as you will pay a lot more as an individual than if you were to operate through a company. In addition it is imperative that business operations are separate from your person, so that your personal assets are not at risk.
In broader terms of tax management – if you are making money on the internet and not declaring it you are breaking the law. The consequences are quite dire and you can face imprisonment. A clear example of not filing your income tax return or not doing it truthfully is Wesley Snipes – who landed a 5 year jail term in early 2008.
That does not mean you can not reduce, defer or eliminate tax on a lot of your income. But a lazy don’t care attitude is neither professional nor profitable. One of the shrewdest business persons in the USA at present is the ex-Australian Rupert Murdoch (who even changed his citizenship to facilitate doing business in America). The Newscorp Group is reported to have over 300 BVI Offshore Companies – which not only protect assets of the Murdoch family and assists them maintain control of Newscorp, but it also results in a very low level of tax for the group and the family.
If you do not manage your taxes effectively the drain against revenue can be 40% and even higher. And consider how you might feel if you were fortunate to have a premium domain name which you could sell for millions of dollars? It is far too late to start thinking about that once you develop your business and start making money. Furthermore if you managed your tax so you do not lose 40% of yearly income then a higher retained earnings can help ensure your business’s continuance and also provide capital for reinvestment and business operations. Compounding investment returns in this highly lucrative industry can produce millions of dollars more in just a few years – even if the initial amount of tax savings is only a few thousand dollars.
If you were to save just $10,000 and invest it earning 7% per month then in 8 years you would have compounded the capital to over $6million. If however you paid tax annually on the profits you would have less than $1million accumulated over the same period of time. For a complete table have a look at this link to an investment site http://www.markettraders.cc/taxes.aspx
As you must realize by now the returns achievable investing in domains can be far greater than 7% a month – and so the foregone compounded capital would be significantly more discrepant when comparing the two options – no tax annually and tax as you go. By deferring tax in the interim years the amount of tax you pay at the end on withdrawal will exceed the sum of all the tax paid throughout the years. However because of the compounded growth of your capital the net proceeds on withdrawal even paying $2million in tax will still produce around $4million instead of the meagre sum that would result after the annual tax slugs.
If you need assistance setting up your business structure it would be opportune to visit http://www.domainsbankers.net and get serious about your domaining business.
