salary, you are exposed to paying taxed twice on the same
earnings, unless you have given yourself a bonus at the end of the
year to offset the profits.
This is total hogwash with regard to Schedule C. If you create an
Inc. which must pay taxes (NOT an "S" corp. Inc.) then you're on form
1120 and do get into "double taxation" when there are dividend
The schedule C, is what makes your business a "Business" vs a
This is hogwash too. The IRS has a whole host of questions none of
which is "Did this individual file a Schedule C?" and for which NO
SINGLE ANSWER is ever definitive that are used to determine when
deductions are legitimately business deductions. And what's worse,
the rules allow any answers this year (or, I think it's for the last
5 years, 3 for certain, but don't quote me) to be answered
differently for THIS year when the same question is asked for THIS
year NEXT year or the next year, etc. In other words the IRS can let
you pass as a business for several years then decide you were only a
hobbyist for those years and DO owe taxes on what you previously
declared as deductible expenses.
The real answer is to set down with a CPA and go over your
books and follow their recommendations.
Yes, IF they are competent tax advisors too.
I'm not a CPA or tax advisor either but I have read the IRS
publications and that is where I got the above not from
simplified "sound bites" fed to someone not willing to read and
understand the tax rules.
James E. White
Inventor, Marketer, and Author of "Will It Sell?