Should I form an LLC for my camming income?
I'd like to get into camming, but my parents have access to my finances and do my taxes so I'm trying to figure out a way to hide this from them.
I'm a student and my parents pay for my housing and tuition, so my bank accounts and credit cards were set up by them because it just made sense at the time. My father is also an accountant and handles all of our taxes by himself, so basically I'm trying to figure out how to earn an income without my parents noticing. The obvious answer would be for me to do my own taxes and open my own account, but, given that I'm a student and will be for the foreseeable future with no plans to get a job, that seems a bit odd, so I was wondering if there was another solution.
I'm aware that I can form an LLC and maybe open a separate business account where my income could go. Before I go this route, I want to make sure I understand how reporting taxes would work.
1) All of my income would go into this business account and I would file taxes for this business separately, correct? So my parents could continue to file my own taxes and then separately I would file taxes for this LLC.
2) If I decide to 'pay myself', that would mean I'm basically withdrawing money from the LLC into my personal bank account and, if I did that, I would have to report this on my personal taxes which my parents currently see, correct?
3) Can I simply spend money directly from my business account?
4) Is there anything I should know about investing my earnings as far as taxes are concerned? I assume something like a Roth IRA would have to be reported on my personal taxes, so would I have to look into taxable investments?
Basically I'm trying to figure out if forming an LLC will make my camming 'invisible' to my family.
Re: Should I form an LLC for my camming income?
Re: Should I form an LLC for my camming income?
Quote:
Originally Posted by
lashesandlilacs
I'd like to get into camming, but my parents have access to my finances and do my taxes so I'm trying to figure out a way to hide this from them.
I'm a student and my parents pay for my housing and tuition, so my bank accounts and credit cards were set up by them because it just made sense at the time. My father is also an accountant and handles all of our taxes by himself, so basically I'm trying to figure out how to earn an income without my parents noticing. The obvious answer would be for me to do my own taxes and open my own account, but, given that I'm a student and will be for the foreseeable future with no plans to get a job, that seems a bit odd, so I was wondering if there was another solution.
I'm aware that I can form an LLC and maybe open a separate business account where my income could go. Before I go this route, I want to make sure I understand how reporting taxes would work.
1) All of my income would go into this business account and I would file taxes for this business separately, correct? So my parents could continue to file my own taxes and then separately I would file taxes for this LLC.
2) If I decide to 'pay myself', that would mean I'm basically withdrawing money from the LLC into my personal bank account and, if I did that, I would have to report this on my personal taxes which my parents currently see, correct?
3) Can I simply spend money directly from my business account?
4) Is there anything I should know about investing my earnings as far as taxes are concerned? I assume something like a Roth IRA would have to be reported on my personal taxes, so would I have to look into taxable investments?
Basically I'm trying to figure out if forming an LLC will make my camming 'invisible' to my family.
1) No. For an LLC you file it alongside your regular taxes. You have to be a pretty big corporation to file taxes entirely separately for the business, but even that wouldn't work because you also need to pay yourself to get any money from that (with the appropriate paper trail) so you're back to square one.
2) Yes...but its a moot point as you already have to file the LLC expenses on your Schedule C. As a sole proprietor, you are the LLC and the LLC is you. The IRS really doesn't try too hard to make the distinction.
3) Only on business-related things.
4) IRA would be a tax-deductible write-off with its own rules, but the max amount you can contribute is capped. A regular, normal IRA lets you put away $5500 per year and write it off completely on your taxes. There's other schemes available for the self-employed sole-proprietor where you can put away as much as $50,000 - provided you are your only employee now and forever. They aren't very liquid without a massive pain in the ass.
Taxable investment accounts will also generate a massive paper trail you'll need to file at the end of the year. The advantage there is that they are very liquid and you can tap them easily for expenses.
In summary, to quote a great lady I know..."No, it is NOT possible."
Re: Should I form an LLC for my camming income?
I'll try to chip in with a response, as this issue has been bugging me for years and I've heard various things. I won't answer your specific questions, but write a general answer that speaks to my experience.
Tax Domme, when she did my taxes first year in the business (I've been in the biz five years now), told me that unless you are making 100k/year consistently, there is no point in having an llc. It's too much expense to maintain it. On a slightly different note, I've read online that making a minimum of 75000/year in taxes before expenses is the threshold for when you should consider incorporating for additional tax benefits.
As an llc, you can split up the monies coming in from your business into "earnings" and "dividens". The latter is taxed at only 15%; the former is taxed at a substantially higher percentage, but you have some leeway in how much you are paying yourself and from that, you would deduct expenses, so as I understand it, this amount can be flexible in your favor as long as it is reasonable given your lifestyle/cost of living.
It is my understanding that, as a sole proprietor, you are eligible for a sep-ira, or a self-employed 401k. The max amounts are different for each retirement plan. In addition to that, you can also have Roth but that monies invested is not tax deductible for your year's taxes. I deducted a lot of stuff as a sole proprietor. My understanding is that the deduction eligibility for llc and sole proprietor is similar, though if you are making a crap load of money, it is my understanding that there is more leeway to legally manipulate the tax benefits if you are incorporated.
As far as your parents declaring you on tax returns, if you are a dependent because they provide you with financial help, your financial information is meshed with theirs. This won't preclude you from establishing an llc and running it as such, but your tax burden would be different than if you were completely independent. When I was in college, my former legal guardian who was in no way financially responsible for me, had the audacity to declare me as an additional dependent on his tax return along with his billion other kids. He never got caught, but basically, I'd urge you to be honest, even if you have to pay more taxes.
Personally, I just incorporated. I'm not sure what difference it would make tax-wise but I'm hoping it'll help me save a little money, assuming I'd be generating 75+k/year before expenses. Given the fact that I view what I do as an independent contractor work in entertainment, the llc functions as a loan-out corporation, such that in the case of any club/person/production company I am to do business with in the future, when they "hire" me as their independent contractor, I would essentially be loaning out my entertainment services via my corporation through their corporation or person.
What we do is a business enterprise, though many do not understand this to be the case. Even clubs oftentimes misclassify us without affording us protections equal to those of employees. I don't think it hurts to legitimize your business, to give it the credibility it deserves. I think you just have to do some serious thinking as to the pros and cons, whether it's worth it to you. Maybe since you're new to the biz, give it a year and see where it takes you, how much you're making, whether you want to continue or transition to other forms of sex work or out of the biz completely.
I hope my little bit of insight helped. It's no way advice or knowledge, just some thought and experiences. Good luck!
Re: Should I form an LLC for my camming income?
It is not odd to open your own account at a bank, it's odd for money to be coming into the account that your parents have access to while telling them you're unemployed. Just open your own account at the bank and don't tell anyone. When you go to open a personal account they don't ask you what you do, they just want a minimum deposit (usually really low, like $25). If for some reason they do ask what you do, just say you're a part time entrepreneur and in between steady work because of school, or whatever. You're not asking for a loan, you're just asking for someone to hold your money. If they don't want to, another bank will.
Even if it were possible to have an LLC in this case, you'd still need your own bank accountS.
Re: Should I form an LLC for my camming income?
An LLC is formed under state law. For FEDERAL INCOME TAXES, an LLC can choose to be treated as a: (a) C-corporation, (b) S-corporation, (c) partnership (the default, if 2 or more owners) or (d) sole proprietorship (the default, if one owner).
The income of all of these, except a C-corp, has to be reported on your personal return.
A c-corp files a separate return, but, like others have said - if the c-corp pays you a salary or dividends, they must be reported on your returns. I know people that take LOANS from their c-corp, which does not have to be reported as income on their personal returns. But, formal loan documents must be drafted and the installment payments must be made (though you can draft a note to defer installment payments for some time). Also, this has a risk that the IRS will recharacterize the loan as salary or dividend, if you ever get audited.
If you can leave the money in the c-corp and use it only to buy business assets (cameras, computers, outfits, etc.) or to invest the earnings, you may avoid reporting any of its income on your personal returns.
But, if you needed the money from your c-corp, you would have to think like a criminal mastermind; you would come up with the idea of using a 'legitimate' business as a front for your real money-maker, e.g., you could use an ebay business as the cover. Your ebay business would sell goods to your (secret) c-corp for highly inflated prices to shift the earnings from your (secret) c-corp to your ebay business. For example, sell 500 novelty pencils worth $.25 each to the (secret) c-corp for $5 each. You would report the ebay sales on your personal returns. You would end up with all the $.25 pencils in your (secret) c-corp and it can sell them on ebay for regular price. But, if your dad is doing your books and reviews all the sales, he may get suspicious about how you are managing to sell all your $.25 pencils to the same corporation for $5.00. It's easy to look up corporation information, unless it is a Nevada or Delaware corporation, so your dad only has to make one phone call to the secretary of state and trace the corporation back to you. You will need to do some complex structuring and use straw people to avoid this.
Another option... you can let your dad file wrong tax returns and immediately amend them after he files them.
Or, just tell your dad you feel you are old enough to do your own tax returns.
Re: Should I form an LLC for my camming income?
Even easier now. Ever look at Corporation Wiki? It is great. You do not even have to know the state of incorporation to look up a corporation, llc. limited partnership, etx. And you can search by an individuals name. Try it.
https://www.corporationwiki.com/
Re: Should I form an LLC for my camming income?
Thanks everyone for your helpful responses!
So obviously my idea isn't going to work, which is fine. Two more questions:
1) I'm not comfortable sharing my SSN with any of these sites, so can I simply form an LLC just for the sole purpose of using an EIN instead of my SSN. I know it's additional work, but if I can avoid submitting my SSN, that would be worth it for me.
2) Is there a way to see how these cam sites identify themselves on a 1099 form? I'm specifically considering Chaturbate, so if anyone knows what business name they use for taxes, that would be great.
Re: Should I form an LLC for my camming income?
Once you form an llc, you'd have to apply for an ein number. If you're using a registered agent, you can ask them to do that for you for an additional fee. What I learned during my research into forming an llc, delaware, nevada and wyoming are best states to set up an llc. Wyoming and Delaware is best for privacy and the irs doesn't hate the states as much as it does nevada. Delaware is best for larger corporations and involves more fees and maintenance. Different lawyers, accountants or ppl will have different preferences as to where to set it up.
As far as what's listed on the 1099s, you can always ask the cam site how they identify themselves on the 1099s before you contract with them. Many adult entertainment companies or venues try to be discreet. I've received forms where they list themselves as "cinema", "entertainment," and oftentimes, with a corporate address that does not trace back to the actual strip club where I've danced.
However, be aware that regardless, a lot of this can be traced if it is ever attached to your ss#. I was filling out a credit report application for a landlord background check and the full name of one of my former clubs popped up as "an employer" during one of my identity verification questions.
If you have an llc with an ein number, established in one of the states that protects llc member's privacy, I don't think you will have the issue I mentioned above-as in, being traceable to adult entertainment via your ss#. Even if you're not making a ton of money, the anonymity might make it worthwhile for you. Of course, on your taxes, the business will be linked to your ss# but nowhere else, and that information is not shared as far as I know in much the same way as it would be otherwise.
Good luck!
Re: Should I form an LLC for my camming income?
Quote:
Originally Posted by
lashesandlilacs
Thanks everyone for your helpful responses!
So obviously my idea isn't going to work, which is fine. Two more questions:
1) I'm not comfortable sharing my SSN with any of these sites, so can I simply form an LLC just for the sole purpose of using an EIN instead of my SSN. I know it's additional work, but if I can avoid submitting my SSN, that would be worth it for me.
2) Is there a way to see how these cam sites identify themselves on a 1099 form? I'm specifically considering Chaturbate, so if anyone knows what business name they use for taxes, that would be great.
1) You don't need an LLC to get an EIN. All you have to do is declare yourself a business. Stand in front of a mirror and say "I r teh BIZNESS, biotch!". Seriously. Then go here and get an EIN: https://www.irs.gov/businesses/small...ber-ein-online
For your business name, just put your real name (not your cam name). No need for anything else.
2) All major cam businesses that issue 1099's, including us, have some strange combos of letters as business names. There's nothing that screams "porn", but usually someone researching it will turn it up pretty quick if they are so inclined.
Re: Should I form an LLC for my camming income?
If youre a sole proprietor with no employees, you must supply your ssn on the w9. Only if you have employees or file as partnership or corp you can use ein.
If youre concerned with identify theft you get a ups mailbox address, give it to the IRS and freeze your credit.