This article is the first in a series that assumes you want to be closer to the former than the latter. What we won’t be discussing are the pros and cons of putting food on your table with the sweat of being in this industry. If you’re looking for a primer on why you should or should not enter the “adult biz”, you’ve taken a wrong turn and should head elsewhere. What we certainly will be providing is a detailed roadmap you can spread out on the passenger seat and take along for the ride. Buckle up, because today we’ll be discussing the steps you’ll need to take before you make that first click towards becoming an adult webmaster.
Joe Webmaster, Inc.
Unlike your uncle’s bootleg DVD business, you’re not running an all-cash operation out of the back of your trunk. Being an adult webmaster is a serious business, and you should make sure you treat it like one. The first step is choosing what type of company you’re going to set up. The good news is that if your pizza and beer money turns into caviar dreams, you can always choose another business entity to grow into. The bad news is that choosing a complex company from the get-go will create a layer of complexity few new business owners are prepared for. A wise webmaster will consult an expert, but we’ll outline the basics for you now.
• Sole Proprietorship: The simplest business to operate and the cheapest to set up. All you are technically obligated to worry about is filing your personal taxes on time (with the appropriate schedules for self employment), and running your business. In theory, this is a great choice. In practice, there are some serious drawbacks that warrant a careful look. The first is liability. Operating as a sole proprietor offers you exactly zero insulation from your business. You are considered to be the same entity, and can be sued personally for liability issues or deals that go sour. The second major consideration is record keeping. A sole proprietor isn’t technically required to keep any records, which leads to a lackluster preparation for audits, major business decisions, or company transactions. In most cases, this type of disorganization looks like a big, juicy steak to the IRS audit man.
• Partnerships: There are two types of this easy form of business entity, the partnership. The first, a general partnership, can be started with as little as a verbal agreement. You aren’t even required to file paperwork. The major downside is that each partner is fully liable for the actions of the other partner(s).
A limited partnership, by contrast, holds each partner liable up to and including their investment. A general partner must be placed in charge of the operations of the company, and limited partners are precluded from becoming involved in management without giving up their liability protection. This form of business entity does require paperwork to be filed with the state.
• Limited Liability Company (LLC): Regarded as the “hybrid form” of the corporate and partnership structures, the LLC is considered to be a separate entity like a corporation, providing liability protection, but is taxed like a partnership. This form of business requires a careful eye towards preparation, and includes requirements for complex documents to be filed with the state for organization and tax purposes.
An LLC can be formed by two or more members (and, in some states, a single member, but this is generally a questionable practice). A husband and wife team, for instance, may be an ideal candidate for this type of company.
• Corporation: A corporation is a complex entity requiring a substantial amount of extra preparation and paperwork. Unlike the other forms of businesses, a corporation is subject to formal requirements such as annual reports and meetings of the board of directors. There are two forms of incorporation. The least complex, an S Corporation, is limited to 35 shareholders (this shouldn’t be a problem for you, with a new website) and is taxed at the personal rates on your Schedule C. By contrast, C Corporations require additional considerations, such as more stringent reporting and the feared “double taxation”, where the corporation is taxed on its profits at the corporate rate, and the tax burden for dividends falls on the shareholders.
• Professional Advice: You wouldn’t make an important decision, such as your company’s operating structure, based on an article, would you (hint: say “no”)? You are strongly encouraged to seek the counsel of a professional in your area. For a modest fee, they can guide you through the process and handle future problems as they arise.
The Importance of a Paper Trail
As in any business, accurate record keeping is the key to adequate preparation in the adult webmaster arena. Your records will become invaluable during the tax season as well as in the case of a catastrophic computer failure on the eve of a site launch. A filing cabinet (or even a manila folder) keeps your webmaster life in order. You’ll thank us later.
Make sure you don’t limit yourself to actual “paper” when record-keeping. Making weekly or bi-weekly backups of your websites, relevant emails, content, contracts, message board postings, contacts, ICQ conversations, and much more will save you the pain of having to rebuild in the case of a hardware failure.
Visions of the Future
Hopefully by now, you’ve been impressed with the fact that adequate preparation will lay the foundation for future success. When in doubt, don’t rush, be accurate, and be thorough. Your work will shine for it.
In the next installment, we’ll tackle a strategy for setting up your “command post”, where you, as the general, will issue the orders to your troops. No self-respecting general worked on the front in a tent littered with old apple cores, coffee stains, and important materials strewn across the room. You shouldn’t either.