Dear Luci,
I have my Etsy shop set up as a LLC. How do I report this in my taxes? Do I need to do a separate return for the LLC? Or does this go onto my personal tax return?
Sincerely,
Confused by Taxes
Dear Confused by Taxes,
This depends. If you are the only owner of your shop then you can claim it on your personal taxes. The LLC would be treated as a disregarded entity and treated like a sole proprietorship. You will need to complete a Schedule C to attach to your 1040. You need a profit and loss statement to complete the Schedule C, which is where you will begin, by completing the Schedule C, and then there will be a line on the 1040 to add that into your adjusted gross income, which is the number that your tax liability is figured from. You will then pay the taxes on your personal tax return and no other return is filed. It is treated as though you are a sole proprietorship, so nothing more is needed in that case.
Now if your spouse is listed as an owner you have a couple of options, depending on what state you live in. If you live in a state that has a provision for community property you can file as a sole proprietor on your joint federal tax return. However, if you live in a non community property state then you will have to file as a partnership. I'll explain this next.
If you have a partner, or if your spouse is an owner in your business and you live in a non community property state, then you will have to file as a partnership, or you can complete form 8832 to be treated as a corporation. The right decision on that really requires more details, such as what state you live in and how much revenue you are reporting, before an educated decision can be made. To help you decide if you want to file as a partnership, or elect to file as a C or S corporation (something most Etsy shop owners won't qualify for, but if you have a high volume shop then you might). Below is taken directly from the IRS website, for filing as a partnership or corporation...
"If the LLC is a partnership, normal partnership tax rules will apply to the LLC and it should file aForm 1065, U.S. Return of Partnership Income (PDF). Each owner should show their pro-rata share of partnership income, credits and deductions on Schedule K-1 (1065), Partner’s Share of Income, Deductions, Credits, etc. Generally, members of LLCs filing Partnership Returns pay self-employment tax on their share of partnership earnings.
If the LLC is a corporation, normal corporate tax rules will apply to the LLC and it should file a Form 1120, U.S. Corporation Income Tax Return (PDF). The 1120 is the C corporation income tax return, and there are no flow-through items to a 1040 from a C corporation return. However, if a qualifying LLC elected to be an S Corporation, it should file a Form 1120S, U.S. Income Tax Return and S corporation laws apply to the LLC. Each owner reports their pro-rata share of corporate income, credits and deductions on Schedule K-1 (Form 1120S).
For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies (PDF)."These links will show you the forms, and allow you to research which filings you qualify for, and which ones will get you the best tax deal.
I hope this helps. If you have any further questions please email me at askhippiepluci@gmail.com and I will answer them in detail.
Much Love,
Luci
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Dear Luci,
I am new to Etsy and have seen many people talking about SEO. What the heck is SEO and how does it affect my Etsy shop?
Help!
Fried on SEO
Dear Fried on SEO,
SEO means Search Engine Optimization. This means how effective your tags, titles, and descriptions are in being found on a search engine. This is important because this is how search engines like Google, and even Etsy, find you. Solid SEO will get your items found on multiple search engines and help to drive more traffic to your shop. Naturally, the more people that see your shop, the more sales you are likely to get.
Getting found on the internet, and even on Etsy, is quite a task. The last I read Etsy alone has something like 850,000 sellers. That is a lot of competition. SEO is the best way to deal with this. Here are a few quick recommendations, and some helpful links, to get you started.
SEO looks at 3 basic things: titles, descriptions, and tags. This should have a bit of repetition. I sell t shirt yarn, so for the best results I should have t shirt yarn in the title of my shop and every listing, the description of my shop and every listing, and in the tags. Put your key search terms in the first 160 characters of your description, as that is all the "spiders" are looking at. The more relevant terms you have the higher your search ranking is likely to be.
That being said, you don't want to overload your titles and descriptions with keywords. You want your listing title to be "pink t shirt yarn", not "pink t shirt yarn, tarn, bulky yarn, crafting cord....". If the spiders see that they will kick your listing out of the ranking. Use the best search term in your title. Include it in your description, but also include another keyword or two in the description. You could say something like "t shirt yarn, also called tarn or crafting cord, is perfect for...". Then use t shirt yarn, tarn, and crafting cord in your tags.
I found this link from Hobo Marketing. It is full of good advice, as well as links to many documents that can help you sort this out. Now some of this won't apply to you as an Etsy shop because you are not writing html for the site, but Etsy has experts doing that so I wouldn't worry about that. Just worry about what they are talking about with titles, descriptions, and tags.
Pay attention to the dos and don'ts. Especially the don'ts. I often compare Google to a Vegas casino in the 70s. Break the rules and they will break your hand so to speak, by not having you show up in search results. Death to an online business. But if you play by the rules, Google can be a wonderful friend to have.
I hope that this helps get you moving in the right direction. If you have further questions, or require some clarification, please send me a message at askihippiepluci@gmail.com.
Much Love,
Luci
Do you have a question? Submit it to askhippiepluci@gmail.com. I will post questions and answers every Saturday!
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