Is it Time To Incorporate Your eBay Business

The New Year will be here soon and this may be a good time to think about incorporating your eBay business.
You are probably thinking:  “I am just a small eBay seller. Why would I want to incorporate?  Doesn’t that cost a lot of money and take a lot of work?”  Let me try and answer those questions.
There are three reasons for an eBay or online seller to incorporate:
1. Image
2. Liability
3. Tax Considerations
Image – If you are trying to buy wholesale from wholesale companies that don’t want to work with small resellers or if you want to get into wholesale tradeshows and merchandise marts, being incorporated makes this much easier.
Incorporating is actually very simple and inexpensive There are several online services where you can incorporate inexpensively. Having those letters, inc. after your company name will give you the image of a more-professional company and a greater number of wholesale suppliers will be willing to work with you.
Liability – We live in a country where lawsuit-hungry lawyers have gotten out of control.  One of the richest areas for lawsuits is product liability.  If you sell a product that injures someone you can be liable. You can buy product liability insurance, but you would probably have to take out a second mortgage on your home to afford it.
Incorporating can usually offer you protection from this liability. When you do business as a corporation you are considered a separate “person” under the law.  If you sold a toy on eBay and a child was injured by the toy, the parent’s lawyer would try to sue you. If they won they could attach your salary or other income, your investment accounts and in some states even the equity in your home.  But, if a corporation sells the same item on eBay the victim/plaintiff could only sue the corporation.  If they win, they can only attach the assets of the corporation.  It is a little more complicated than this, but I only have so much room in a newsletter article, but you can read more about liability protection at www.legalzoom.com
Tax Savings– A corporation doesn’t afford the ability to dodge taxes, but there are a few more tax breaks under the corporate umbrella than you can enjoy as a sole proprietor.  I have been incorporated for the past three years and each year I see many more tax savings than when I was a sole proprietor.
If you incorporate, I strongly recommend hiring a CPA to do your taxes.  Mine charges $300 a year to do my corporate tax returns –but his skill, combined with my corporation, saves me far more than that every year.  Also, tax returns signed by a CPA are far less likely to be audited than if they are signed by yourself or a tax preparation firm. If eBay is not your full-time job and you work or have another income, the corporation can even help reduce the taxes you pay on your other income in many cases.

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