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Should you run your stream through a personal company (Sole proprietorship)

Instead of running you livestream as a private individual, then you can save a lot of money by running it through a privately owned company, usually known as a sole proprietary company. We will not look at other types of company structures in this article but may draw some comparisons to help you understand.

Before you read any further, make sure to notice this is generally based information and you should talk with a local attorney or business advisor understand what regulations, tax-benefits, etc; that apply in your state or country.

You are still fully liable like a private person

Running a sole trading company does not exclude you from the risk of liability, as it is not a Limited Liability or C-Corporation you are starting. In overall, the main differences is how you pay salary, is taxed and of course, the liability should you go bankrupt.

If you want to remove all liability, consult with a local attorney or business advisor to know the core differences and how it affects you.

Value Added Taxation - VAT

Cut down on VAT/Sales Taxes

In case you did not already know, companies are able to balance their VAT between purchases and sales as it is meant as a consumer tax in most countries.

America has a VAT (Value Added Taxation) of 10% flat, which means you pay an overhead of 10% on consumer goods at a private person. As a business, you can get this back from the government when buying goods. You do, however, need to pay the government this overhead on sold goods. Just make sure the VAT is stated on your receipt/invoice as you are only eligible to get it back if documented. Here you find VAT-Rates outside the states: International Business — VAT-Rates by Country

To give an example, let us say you buy a new computer for the livestream costing you $1,400 + 10% VAT [$140] = $1,540 consumer price. That means, as a company, you pay the $1,540 to the seller and then inform your government of the $140 sales-tax to get it back. If you then sell 10 T-Shirts for $100 + 10% VAT [$10] = $110 making you $100 in sales tax - you will only get $40 back from the government.

Receive tax benefits and reduce your personal taxes

Earning money privately usually require you to pay taxes of all the money you earn without any tax-exempts as people are "just" sending you money. With a company, you can utilize this income in a much better way. This can be a little nerdy, so please bear with me.

Let us say that you stream 3 times a week earning $100 from donations (or "Tips") in average per stream, earning you 3 * 100 = $300 a week; approximately being $1,200 a month in donations. Maybe you have 15 subscribers earning you about $33 a month meaning paid out approximately every 3rd month.

Leaving out merchandise and all the other nice income streams a livestreamer can have, to make it simple, you earn about $1,233 a month. As a private person, you would report this income to the government and pay income tax of this money. Not as a business, then you would simply save all the receipts of all this income and look out for any VAT/Sales taxes.

Now you are free to use these $1,233 in whatever business-related way you want. Buying a new monitor, webcam or maybe a nice and comfortable chair? Let us go with buying a chair for $478.5. Then you get a receipt of $435 + 10% [$43.5] = $478.5 consumer price. You pay this chair with the $1,233 from your income, leaving you with $754.5 on your account where $43.5 of them will be returned from the company, giving you a total of $795.

Value Added Taxation - VAT

You need to pay bills and buy groceries to live, so you pay yourself a salary of the rest to live for. This is usually the most difficult part to exercise in the start. To know your tax-bracket, we need to know how much you expect to earn this year in salary. Let's say you expect an average salary of $1,000 a month - meaning some months more and some less, you end up with an annual income of $12,000.

Now that we know you expect to earn about $12,000 this year, we can locate you in a tax bracket accordingly. You would then deduct the taxes appropriately from each salary. As states vary and some, like Texas, does not have an income tax; let us say you end in a tax bracket of 15%. That means as you pay yourself a salary of $795, you would need to reserve 15% for the government. Your salary would, therefore, look like $795 - 15% tax [$119.25] = $675.75 paid out. This money can now be spent on bills and groceries.

This is based on an annual income of $12,000 so if you end up earning more then you may have to pay additional taxes by the end of the year. If you, on the other hand, end up earning less then you will receive the overpaid taxes from the government assuming your state or government does not make an error.

I RECOMMEND YOU TALK WITH A LOCAL ATTORNEY OR BUSINESS ADVISOR TO UNDERSTAND THE REGULATIONS AND TAXES IN YOUR STATE OR COUNTRY. YOU ARE PERSONALLY RESPONSIBLE FOR YOUR FINANCES AND SHOULD NOT FOLLOW THIS INFORMATION BLINDLY AS IT MAY VARIATE FROM STATE TO STATE OR COUNTRY TO COUNTRY.

Released on June 9th, 2019
MrBetaSkull
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