As I stated early, once of my goals for 2007 was to investigate other streams of income. I have to admit I wasn't really thinking about this blog at the time, but a recent comment from Larry McDonald got me thinking about it a bit more seriously. How would you set up a blog as a business?
First off I would suggest a sole proprietorship as the business structure in your own name. That way you don't have to register the business name (check you local provincial law to make sure this is correct), but your personal assets are up for grabs if you ever get sued. I personally don't think this is likely in blogging as long as you cover yourself well by not making recommendations. A suggestion or what you personally do are one thing, but a recommendation is an invitation to be sued.
Then make sure you have a separate bank account that you pass all the blogging money through. Next keep your accounting records. When you deposit a cheque from Adsense you must log it in your general ledger. As when you have an real business expense, you deduct it out of your general ledger.
Read the fine print on your friendly neighbourhood taxman's webpage on which home related costs you can deduct. This is typically includes mortgage interest, power, water, and insurance but not your phone in Canada (unless its a dedicated line for the business). This is based on the usage of the room so again make sure to do your reading over at taxman's webpage to calculate the deduction correctly. Personally I can estimate since I know what my wife deducts for the daycare in the house. I could realistically write off about $10/month based on the amount of time on average I spend blogging. So basically I have to average over $10/month Adsense revenue to make setting up the blog as a small business pay off.
So why do all this work? Let's for example say I managed to earn $15/month and I can deduct $10/month. That means instead of being my full marginal tax rate for the extra $180/year of income I would only be taxed on $60 of it, so at my marginal tax rate (35%) I would save $42 in tax. So unless you earn a lot of money from blogging and spend a lot of time doing it, it may not pay for you to setup your blog as a business.
Have a good weekend,
CD
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2 comments:
CD45: What about claiming losses from a blogging business against employment income? Of course, if one claims loses year-in and year-out RevCan might audit on the basis of no reasonable expectation of profit. But in the first two or three years, it might perhaps pass?
Larry,
That's true. You might get away with a lose for a year or two and claim it against your regular income.
Three years might be pushing it. I'm not sure how touchy RevCan is about on going loses, but you would expect them to understand the high failure rate of small businesses.
I'll planning on giving it until the end of the month to get idea of the adsense revenue and do some more projections and then decide.
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