Ask HN: How do I manage the profit of a successful website? • Hacker News Board

Re: Ask HN: How do I manage the profit of a successful website?

#11

Post by capableweb » Mon, Jan 03, 2022, 1:13 PM UTC

anemic wrote: post #7

How about donating to charity? If you don't need the money, there are people in the world who are struggling to get clean water. Spend some time to verify that your money goes to a good cause and not to scammers. You could start by donating to a local sports team to buy equipment to those who can't afford if, for example. Then go see their games to see what you've accomplished.

Donating excess profit (from self-run business and/or employment) to local non-profits/small organizations is the single most satisfying thing I've ever done. Not only does it feel great to donate the funds to them, but to be able to afterwards tell the change you're able to help them achieve is invaluable.

Re: Ask HN: How do I manage the profit of a successful website?

#12

Post by markvdb » Mon, Jan 03, 2022, 1:19 PM UTC

The HN audience, friendly as it is, is probably not your best advisor on these matters.

Your accountant or tax adviser should have advised you about this ages ago. Either improve communication with your current accountant or fire him and get a new one able to properly answer this question.

Re: Ask HN: How do I manage the profit of a successful website?

#13

Post by sparkling » Mon, Jan 03, 2022, 1:30 PM UTC

You have ~$20k left over at the end of the month. My advice would be to take a small portion of that money and talk to a tax professional rather than getting advice from HN. It really all depends on your corporate and personal setup.

Re: Ask HN: How do I manage the profit of a successful website?

#14

Post by sparkling » Mon, Jan 03, 2022, 1:33 PM UTC

mw67 wrote: post #4

Invest the extra cash, let the money do the work for you.

Doing investments inside the company may or may not make sense. If the company ever has any legal troubles, those company investments could be in danger. Again, as has already been mentioned here: talk to a accountant and/or tax advisor.

Re: Ask HN: How do I manage the profit of a successful website?

#15

Post by eaenki » Mon, Jan 03, 2022, 1:36 PM UTC

What a massive waste taking out 14k in salary. Almost everything can arguably be a business expense. Plus, any investment, just use SVPs or other methods where you don't incur taxation: would make no sense to take them out as salary just to invest them to ur name rather than a company's name. One day you'll pay the capital gains (which can themselves me minimized) and just buy a villa for business events, a range rover to go to meetings, and so on, on a legal structure's name, that is. gl.

Re: Ask HN: How do I manage the profit of a successful website?

#16

Post by vmception » Mon, Jan 03, 2022, 1:37 PM UTC

My favorite thing to do is tax shelter!

With $45k/mo income self employed, you can contribute to a self directed Roth 401k as both the employee and the employer. This boosts your maximum 2022 annual contribution from $20,500 to $60,500. You can only contribute with 20% of the revenue, so you need around $300,000 to pump the max of $60,500 into one of these. It is slightly lower if you do this through an S-Corp. So everyone is correct that you need a CPA, now that you can afford to have some real fun. There are some things that are almost impossible to do alone, or actually impossible.

Unlike corporate 401ks, you can invest the money almost any way you want - from a passive vanguard fund to the sketchiest and most exciting crypto assets - all the money grows tax free in there and is tax free upon withdrawal when you reach certain age thresholds.

Your work is just beginning!

- CPA versed in personal, business and retirement accounts

- 401k Compliance company

- Payroll company to process W-2’s

- 401k Bank account

- 401k Traditional brokerage

- 401k Crypto brokerage

- Separate wallets to never intermingle assets

I think this is achievable for ~$1200 first year with ~$900 annual fees. Split between the Compliance company, payroll company and cpa.

Eventually you’ll have enough in those to invest in private equity funds

If you’re worried about making money for the sake of it, you can always set a few foundations or charities as the beneficiary of the 401k plan, in event that you die. Or just pay a boatload in taxes for not making the transactions that Congress prescribed.

Once you get that on autopilot, then you can work on ensuring current year tax deductions. Are you getting the research tax credit due to your US-based (?) software engineer? For example. Maybe relevant for you, maybe not. CPA.

Re: Ask HN: How do I manage the profit of a successful website?

#17

Post by mooreds » Mon, Jan 03, 2022, 1:37 PM UTC

From a tactical level, I'd repeat the suggestions to find a good local accountant to discuss your issues with. I found mine through a referral from a friend who was also running a small business and he has been invaluable for years (through startups, LLCs and W2 jobs).

Since you are US based and have minimal employees, you may want to look at either a SEP-IRA (which lets you save ~$50k a year pre-tax) or a individual pension (less experience with that, but have read about it).

From a strategic point of view, I'd sit back and consider your goals. What do you want to do with that cash? Save for retirement, sure. It sounds like you've ruled out expanding the business, but there are other things you can do:

   * start a new business
   * start a foundation
   * save for the future (non-retirement)
   * optimize the business even more
   * buy alternative investments (real estate, for example)
   * buy a hobby farm
   * work less hours

Any advice I give you on those paths won't be worthwhile since I don't know your goals. But that discussion is worth having, even if it is with yourself.

Re: Ask HN: How do I manage the profit of a successful website?

#18

Post by jrs235 » Mon, Jan 03, 2022, 1:40 PM UTC

adamnemecek wrote: post #8

What does the site do out of curiosity.

The site makes money. /s

I highly doubt, nor expect, the OP to divulge the information you're asking for. Would you welcome 100's of new entry copy cat competitors?

Re: Ask HN: How do I manage the profit of a successful website?

#19

Post by mynegation » Mon, Jan 03, 2022, 1:41 PM UTC

Talk to your accountant and/or financial advisor. I do not know much about Germany’s tax regime but in many countries it is beneficial - if you leave money inside a corporation - to have an investment account and essentially use it a pension scheme. LLC may not be eligible for that and you may need to convert to a whatever is the German thing for C-corp.

Re: Ask HN: How do I manage the profit of a successful website?

#20

Post by pyrrhotech » Mon, Jan 03, 2022, 1:43 PM UTC

I would file as sole proprietor on schedule C. Write off all expenses, then you'll be taxed on excess profit at your ordinary income rate. Put most of the extra money into ETFs to save for retirement.

It sounds like a lot of money now, and if it never goes away, is completely autonomous someday, or you never want to retire, it is. But if this business were ever to fail or you want to retire it someday (if it requires a lot of active involvement), to replace 170k/year in income, you need a minimum of $5.6M in retirement savings using the 3% rule. That will take quite a long time to save, even with your income.

Not to mention, if you ever have lifestyle inflation and want the whole 45k/month some day without relying on this website, you'll need a whopping $18M which will likely take you most of your adult life to acquire unless you grow the business substantially. Check out /r/fatfire that has a lot of advice and resources for wealthy people. And if you happen to be looking for some alternatives to passive ETF investing, check out my site grizzlybulls.com to learn about algorithmic trading. Congrats on your success!