Paying Taxes as an Affiliate
Thursday, Feb 19, 2009
As an affiliate for online marketers, you are running a business. How big or small that business will be is up to you. However, keep in mind that if you are making money as an affiliate, you are responsible to pay taxes on that income.
“Many people with affiliate businesses, whether they are acting as an individual, as part of a partnership or as part of a group, may choose to form a limited liability corporation.”
New York Affiliate Tax Law
New York proposed a law stating that those who make online purchases using affiliates in New York are subject to New York sales tax. Naturally, affiliates and affiliate marketers were opposed to this proposal and it lead to some affiliates getting discouraged from operating in New York State. The law was however activated the 1st of June 2008.
Tax Law and Limited Liability Corporations for Affiliate Companies
Many people with affiliate businesses, whether they are acting as an individual, as part of a partnership or as part of a group, may choose to form a limited liability corporation. The primary reason for such a decision is that it insulates ones personal assets from any legal action brought against the company, and with fears about affiliate fraud high, this is a level of protection many affiliates prefer to have.
Tax Implications of Limited Liability Corporations for Affiliate Companies
Your LLC may be taxed a number of different ways. You may be taxed as a sole proprietor, a partnership, an S Corporation or a C Corporation. If you are registered as an S Corporation, the company itself does not pay taxes, however the shareholders are responsible for paying taxes on any income they derive from the company.
Tax Penalties on Limited Liability Corporations for Affiliate Companies
Check your state's laws regarding limited liability corporations. In some states, such as New York, you may be required to pay a franchise tax or filing fee for your LLC. This tax is usually a relatively small amount and worth the protection the LLC offers.
