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

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

#101

Post by 4887d30omd8 »

Cwizard wrote: post #31
capableweb wrote: post #11

Earlier quoted context omitted.

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.

Do you have any advice on finding/selecting the right charities? Each year I give away a portion of my salary but always struggle to find good charities to give to. Perhaps I am overthinking it, but any tips on this would be appreciated.

https://www.givewell.org/ Is a good site for finding charities that create the most good per dollar. That’s what I care most about.

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

#102

Post by nodesocket »

vmception wrote: post #16

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 ev…

Maybe I am not understanding but even with a solo 401k you can’t contribute it all into the roth part. Only like $5k. The rest goes into standard retirement account which is tax deferred.

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

#103

Post by tomcam »

japhyr wrote: post #100
tomcam wrote: post #85

Earlier quoted context omitted.

You in particular should also benefit greatly from a SEP IRA. Expensive to run but lets you sock away much much more.

What's expensive about running a SEP IRA? Are you referring to the fact you have to contribute to an employee's IRA as well as your own?

I had to jump through hoops and pay a specialized firm to administer. Maybe it no longer applies?

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

#104

Post by celestialcheese »

nodesocket wrote: post #102
vmception wrote: post #16

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 ev…

Maybe I am not understanding but even with a solo 401k you can’t contribute it all into the roth part. Only like $5k. The rest goes into standard retirement account which is tax deferred.

Search Mega Backdoor Roth [1]

1 - https://www.mysolo401k.net/solo-401k/mega-back-door-roth-usi...

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

#105

Post by paulclinger »

throw1234651234 wrote: post #66
ryanjmo wrote: post #27

Are you a solo owner? You need to take an s-corp election and you do not need to pay yourself that type of salary. At most you should pay yourself $54,000 a year. The reason is money that goes through an s-corp you don’t pay self employment taxes on. Salary you do. That is 15%. You wouldn’t need to pay yourself more than $54,000 without the government getting upset. Right now, based on $54,000 a month you are losing…

Are you saying that if you have an S-Corp, and not an LLC, any money the company makes past $54,000 annually is tax free?

It's not tax free, as you're still paying the income tax on it, but if you (as the owner) get it as distribution instead of salary, then you're not paying payroll taxes on it, which is what was suggested in the parent comment. You'll have to make sure you're paid "reasonable compensation" (https://www.irs.gov/pub/irs-news/fs-08-25.pdf).

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

#106

Post by cityzen »

throw1234651234 wrote: post #66
ryanjmo wrote: post #27

Are you a solo owner? You need to take an s-corp election and you do not need to pay yourself that type of salary. At most you should pay yourself $54,000 a year. The reason is money that goes through an s-corp you don’t pay self employment taxes on. Salary you do. That is 15%. You wouldn’t need to pay yourself more than $54,000 without the government getting upset. Right now, based on $54,000 a month you are losing…

Are you saying that if you have an S-Corp, and not an LLC, any money the company makes past $54,000 annually is tax free?

Sort of but you don’t even need to have an S-Corp, you can apply as an LLC filing as an S-Corp. BUT You have to do it at the beginning of the year.

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

#107

Post by throw1234651234 »

sgc wrote: post #80
throw1234651234 wrote: post #66

Earlier quoted context omitted.

Are you saying that if you have an S-Corp, and not an LLC, any money the company makes past $54,000 annually is tax free?

S Corp profit is pass through, so you pay taxes on it. But it is not employment income, so no self-employment tax on top of regular income tax. https://www.investopedia.com/terms/s/subchapters.asp

Picking a random comment to reply to since all of these are good answers - thanks everyone!

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

#109

Post by 1123581321 »

tomcam wrote: post #103
japhyr wrote: post #100

Earlier quoted context omitted.

What's expensive about running a SEP IRA? Are you referring to the fact you have to contribute to an employee's IRA as well as your own?

I had to jump through hoops and pay a specialized firm to administer. Maybe it no longer applies?

I can’t say what happened, but SEP was always the simpler, cheaper option, nearly DIY compared to a proper 401k.

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

#110

Post by Asking__HN »

A special thanks to all who replied! The spirit of the question was definitely less “how do I avoid taxes” and more “what other things should I be considering”, _but_ I’ve learned that I definitely need to find a good accountant and tax person because what I’m doing now in that regard is horribly inefficient.

I love the wide range of suggestions I received as this is exactly what I was looking for and the HN community didn’t disappoint.

Aside from tax/accounting/business stuff, here are some great takeaways/ideas I got from you all:

- First and foremost, and I’m extremely embarrassed to admit that it hadn’t even occurred to me, I want to start sponsoring folks working on open source projects. I definitely make considerable use of such projects and will definitely start supporting them monetarily.

- Related to the point above, I like the idea of sponsoring artists—-musicians, local museums, etc. I don’t have Muskmoney to throw at the community to make all artists rich, but I can definitely help fund a project or two for a year or something.

- I love the idea of sponsoring some local sports teams.

- “Pay for Sublime Text” made me chuckle.

- I’ve tried offering more money to my other developer, but they already have a well-paying job and this person was more of a mentor to me through the whole process and they are just happy to see the project succeeding.

- Donate to charity. Love the idea, but as others pointed out it’s hard to figure out where to put that money. I’m thankful for the givewell and charitynavigator links and will check them out.

- Assume it won’t last forever. This I know, and it’s part of the reason I wanted to ask HN. It’s operating profitable enough to get me set for life, so once I’m there, I now have a lot of good resources to turn to to see what else I should focus attention and money on.

Thanks again HN!

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