Is an LLC or an S Corp. better for affiliate marketing?
I wish to begin affiliate marketing for just myself. Would it be better to register as an S Corp. or LLC? This would also apply to purchasing health insurance for myself in my "corporation".
We tell our Tax clients to start with an LLC. Both are passthrough entities. An S-Corp is going to cost you more than its worth right now in filling and Tax prep. Also, if you decide to close you have the nightmare of filling the paperwork with the state. You will still be able to purchase Health Insurance and get the Self employed deduction on your taxes.
Your CPA can help you further, if you do not have one I would suggest interview a couple that can help you going forward.
You should definitely register as an LLC. That gives you the flexibility to do your taxes either using Schedule C or the S-corp method, and it has the most favorable pass-through rules regarding deductions and taxes. Donald J. Trump is trying to make it even more favorable to have an LLC but that may or may not pass Congress. There are only a few exceptions such as Texas where there is a 0.5% LLC income tax; most states have a reasonable fixed annual fee to register an LLC and some including Florida have an additional start-up fee which is also reasonable.
There are two separate, but related, questions here.
The first one is what kind of state law entity to create. Each state's laws allow for a variety of entities to be created. The most common entity types are corporation, partnership, LLC and trust. LLCs are popular because they are often inexpensive to register, they are flexible in how they can be structured, and they often may require fewer formalities than corporations (e.g., annual meetings, minute books). It's hard to give more specific advice because each state is different. You should have an attorney help you with structuring the entity correctly.
The second question is how the entity you create will be taxed. At a high level the options are: Disregarded entity (where the IRS does not view the entity as being separate from its owner); partnership; "C" corporation, and "S" corporation. Note that there is no "LLC" tax treatment. If you choose to form an LLC you will have to elect a tax treatment based on the circumstances of your case. If you are the sole member of the LLC (i.e., the only owner) then the default tax treatment will be disregarded entity. If you need to make an election, you'll have to do a bit of fortune telling to know what the economics of the business will look like in the future. If this is always going to be a small side-hustle, then disregarded entity treatment might be ok, and you'll just report the income and loss of the business on Schedule C. If you think it might grow to have significant profits, an S Corp election might reduce your self-employment tax.
Check with your CPA on this one. As a suggestion, you may wish to wait on company formation until you start generating revenues. Sometimes, a good idea just doesn't pan out as hoped. Then you have a company with no income. It's not a problem of course. Again, your CPA can help you make this and other important determinations for your future endeavor. Best of luck to you!