As your TPT store starts making money, there comes a point when you realize, Oh wait…this is actually a business.
And then come all the questions you probably didn’t think about when you uploaded your first resource. Do you need an LLC? Should you have a separate bank account? What’s an EIN? When does an S-Corp come into the picture?
These aren’t exactly the fun, creative parts of running a TPT store, but they’re important ones.
For this episode, I brought in my husband, Parker, who is a former corporate accountant and now the CFO of my company. I asked my audience for their biggest business setup questions, and we sat down to work through them as simply as possible.
Quick disclaimer: We are not your accountants or attorneys, and nothing in this post or episode should be considered financial, tax, or legal advice. We’re sharing general educational information and our own experience. Always talk with a CPA or attorney about your individual business and situation.
Do You Need an LLC for Your TPT Store?
One of the biggest misconceptions about forming an LLC is that it automatically means you’ll pay less in taxes.
As Parker explains in the episode, an LLC is primarily about creating legal separation between you and your business. For a typical single-owner business, forming an LLC generally doesn’t change how that business income flows through to your personal tax return.
So, when should you form one?
There isn’t one magic income number that works for every TPT seller. The costs and requirements vary by state, so it’s important to look at your state’s specific rules and talk to a professional about your situation.
Start by Separating Your Business Finances
Even if you’re not ready to form an LLC, one simple step can make running your TPT business much easier: keep your business income and expenses separate from your personal spending.
That could mean opening a separate checking account that you only use for your TPT income and business expenses. When you purchase clip art, business tools, educational materials, or other expenses for your store, everything is coming from the same place.
Not only does this make it easier to see what your business is actually earning, but it can also make bookkeeping much simpler when tax season arrives.
What Happens When You Do Form an LLC?
If you decide an LLC makes sense for your business, there are a few additional pieces you’ll need to think about.
In the episode, we walk through the general order of setting up a business mailing address, forming the LLC, getting an EIN through the IRS, and then opening a business bank account. We also talk about registered agents and why you should think about privacy before putting your home address on business documents that may become publicly searchable.
It sounds like a lot when you see it all at once, but most new TPT sellers don’t need to tackle every one of these steps on day one.
What About Becoming an S-Corp?
An S-Corp is another term you may start hearing as your business grows, but it’s different from simply forming an LLC.
As Parker explains, an S-Corp is a tax election. At that point, things become more complicated because you may be paying yourself through payroll, determining a reasonable salary, withholding taxes, and filing additional tax forms.
This is definitely an area where we recommend working with a CPA rather than trying to figure everything out yourself.
Build the Business One Step at a Time
If you’re just starting your TPT store, don’t read all of this and think you need an LLC, EIN, business credit card, payroll system, and accountant tomorrow.
Start with the basics. Keep your finances organized, learn how your TPT income affects your taxes, and get professional guidance as your business grows.
And if you’re still at the stage where you’re trying to figure out what to create and how to start making sales on TPT, join me for the $1K TPT Challenge. We’ll spend three days working through Demand, Create, and Sell so you can start building your TPT business with a strategy instead of guessing.
