New York State tax Law – Affiliate Marketing Work Around!

If you’re an affiliate marketer residing in New York State, by now you have to be familiar with the new law. I was not aware of it until a few days before the law took effect. I received several emails from merchants who were very sorry but because of this new law and my New York State address, they were dropping me from their affiliate program. As you can imagine, I learned as much as I could within the next several hours. Scrambling for a solution, I tossed around a number of ideas, but ultimately everything I thought of came back to the IRS and at what address I claimed when I filed my taxes. There was no way around this, I have a full time job with a very large reputable company in New York, if I claimed residence elsewhere, how can I possibly be at my job in NYS at the same time? It wouldn’t work. I even thought of using my brother’s address in Georgia, since he and I have the same last name.

So, I finally I came up with an idea that would allow me to keep my residence in New York State AND get me back on all of my discontinued merchant affiliate programs. I ran everything by a licensed CPA here in New York, and everything looked perfectly fine. The process was really very easy and didn’t take that long.

First, I need to write a disclaimer, so to speak. I just want to say that I am not a lawyer, nor have I consulted with an attorney on this. I’ve only consulted with a CPA who understands the whole corporate accounting structure nationwide and in NYS. Therefore, I cannot be held responsible for information given if it harms anybody mentally or financially. I am purely telling you what I did, and that it worked: I now have all of my merchants back, legally.

There are basically 4 things that need to be done in order to be accepted back into a merchant’s affiliate program.

  1. Incorporate in another state, preferably Nevada. Why Nevada? I’ll get into that later. But by incorporating, your business is now a legal entity with an entirely separate business address from your residence. This is actually quite common and very easy to do.
  2. Acquire an EIN or tax identification number with the IRS.
  3. Open up a bank account with a local branch in the city where your new address is. I went with Wells Fargo.
  4. Obtain a phone number for your new business. This was so easy that you’ll actually kick yourself.

That’s it! Let’s get started and I’ll go into detail for each step.

1) Incorporating your business in another state.

From what I understand this is a fairly common practice. I didn’t know that you could do this until I studied it and dug deeper. And what I came across was that it was advantageous to incorporate in the state of Nevada. Why Nevada? Several reasons:

  • No Corporate Income Tax
  • No Taxes On Corporate Shares
  • No Franchise Tax
  • No Personal Income Tax
  • No IRS Information Sharing Agreement
  • Nominal Annual Fees
  • Minimum Reporting and Disclosure Requirements
  • Stockholders Are Not Public Record

Now, most of these things will have nothing to do with you and the way you conduct business, but it just shows the lack of constraints placed on corporations in Nevada.

Here’s my situation and it’s probably very similar to yours. I have a full time job; I run a web design firm locally in my spare time and have several local clients. The web design business is nothing more than a DBA or “doing business as.” Any income I get is merely reported on my personal income taxes at the end of the year. What’s nice is that any expenses I incur are also included as deductions. In addition to the web design business, I have several websites that I run that do nothing but promote affiliate products. Some of these are doing very well providing me with a nice little bonus at the end of each month. Really, I was fed up with the yearly salary increases being about 1.5 to 1.75 %, and with taxes and everything going up, I was actually making less and less money each year. This was my way of making sure I got a bonus every year. Until this law went into effect and stopped my bonuses like a brick wall.

So what I’ve done is incorporated a business in Nevada, it’s a legal business entity that is legally separate from me, therefore, it separates me from my personal home residence. I am the only employee and in fact, I’m the CEO, vice president and all the officers combined. Yes, you can do this. The officers or officer doesn’t even have to reside in the state the business is incorporated in. Let me state this again, because I think it’s mildly important: You DO NOT have to reside in the same state that the business is incorporated in. You can live in NYS and make all the business decisions for the corporation. Not convinced? Do your own research; it’s actually a rather common practice that I was completely unaware of.

I know what you are thinking, “I know nothing about incorporating a business, let alone doing it in another state?” That’s why I’m here to help. You don’t have to know anything or really do anything; there are many companies that will eagerly handle all of this for you. After searching the Internet for a number of days, remember I didn’t want to get this wrong–I wanted to get it right the first time, I did my homework. And I settled on The Company Corporation . Why did I pick them? They have been in business for 15 years now, they have a great reputation and they have a very knowledgeable staff that can answer any questions or concerns for you.

From the Company Corporation’s Homepage, select Incorporate Now” just to the left of the birthday cupcakes. From here, use the “select a state” pull down menu and choose Nevada.

Company Corporation Image 1

For corporate type or entity, you will most likely want to choose “C corporation.” There are differences between an LLC, an S corp, and a regular C corporation. Doing an analysis on my situation, it came down to a matter of what was going to benefit me financially more. A C corporation provides the best tax break or incentives, however you choose to look at it.

Tax Analysis

Now you “select your package.” You will want the Complete Package. This package includes everything you need with the exception of the Mail Forwarding Service; you will need to select this in addition. You will not be at your company’s physical address, so anything that is sent there will need to be automatically forwarded to you.

Company Corporation Image 2

Your total at the bottom should be $609 as shown in the picture above. The reason I chose the complete package is because you NEED a resident agent. This is a must because you are not residing in Nevada. A resident agent is just a person who has been selected by The Company Corporation to represent the business in case paperwork, such as court papers that need to be served, can be delivered in person. This is a requirement to incorporate in Nevada. No big deal, it will probably never happen to any of us, just a legal formality and a requirement. You get 6 months of Registered Agent free when you sign up, so this additional 6 months of representation is a bargain.

This package also includes obtaining an EIN (Federal Employer Identification Number), even though you can get this number yourself, but why take the chance of making a mistake, just let them handle this for you, it’s one less thing to worry about.

In the next step, you will need to choose a name for your business, before you continue. I would search with the Nevada State website to find a name that isn’t already being used. You can go here and search;

https://esos.state.nv.us

That’s it! That’s all you have to do. They will handle all of the paperwork for you, and file the Corporation with the State of Nevada. You will then receive a package from them with a nice leather-bound binder to keep all your paperwork together. There are still some tasks that need to be done in order to keep your corporation out of trouble with the state. These tasks are minor, like file a business license, which you don’t have to do. This is generally for if you were selling stuff at a particular location or meeting people face to face. In our affiliate business, we just push people on the Internet in a certain direction; we don’t actually interact with anybody, so this does not apply.

Another task would be to draft your bylaws, and the Company Corporation gives you this. Basically, just write your company name at the top, sign the last page and your done.

Having someone to do these little tasks or corporate chores is the main reason I chose to use The Company Corporation. After you order your Incorporation package and everything is filed, you get your own personal access page on their website that lists all the little chores that need to be done and the date that they need to be completed by. This keeps everything in order and gets everything done on time. Remember I said I wanted no mistakes? This is just another insurance measure to keep me from making any, and I like that, a lot!

Estimated time to obtain your articles of incorporation? 2-3 days. Yes, days, not months like anything in NYS would take. This is what also impressed me about Nevada. They want your business up and running as quickly as possible. They aren’t kidding. In New York, there would be so many desks that this paperwork would have to cross that it would probably get lost…..

2) Obtaining a Federal Employer Identification Number (EIN)

After you order your package and you receive your Articles of Incorporation, the Company Corporation will file, with the IRS, an application to obtain an EIN or Federal Employer Identification Number. This is going to replace your Social Security number when you sign up for affiliate programs.

Even though I could’ve done this myself, since I’ve never done it I thought it would be best left to a professional. Once this is complete, you will be notified by both the Company Corporation and the IRS what your new EIN number is. This should take about 7-10 business days.

So now, I have the following;

  • A legal corporate identity or name
  • A legitimate business address
    • Not some PO Box or similar but an actual number and street
  • An EIN number for tax purposes
  • All the necessary paperwork involved with Incorporation process
  • Access to my own personal to-do list from the Company Corporation listing certain tasks than must be completed in order to stay compliant with the State of Nevada

3) Open up a bank account for your new Corporation

This is necessary in order to keep the corporation legit and actually “working” in Nevada. So, you basically need to open up a bank account with a local bank in the same city as your new address. Make sense? Well, mine happened to be Carson City, Nevada. I chose Wells Fargo as my bank because they are all over the Southwest and have a great website where I can do all my banking online. Good thing, because I’ll probably never set foot in Carson City, although it is near Lake Tahoe!

Visit www.wellsfargo.com and find out where your local branch is, call them and tell them that you would like to open up a business account with them. And explain to them that you live in New York but the corporation resides in Nevada. This account can all be opened over the phone, just ask for a business specialist. You will need a fax to fax them 2 forms of ID, but you will give them the information for the business as well as your personal stuff.

Don’t worry, they know what they are doing, they will walk you through the entire process and in a few days, you will have a new bank account in a local Wells Fargo bank in the same city as your new corporation.

Now, there is just one last thing to cement the legitimacy of your new corporation.

4) Obtaining a telephone number for your new Corporation

This one is a cinch. Assuming you are like me and will probably never use this, it’s a waste of money to use a service like VOIP (Vonage, etc…) where you can get a number in any area code. Although this is an option, I found another one that is next to nothing: SkypeIn

You need to download the software onto your computer, then sign up for an account (remember to use your new corporate info) and you can select a number in Nevada for $60 a year. That’s right, just $60 a year. Now, they don’t have a number available for Carson City, or its area code, so I just chose the only one available in Nevada. It’s in the same state, that’s good enough for me.

If you’re not comfortable with this, you can try RingCentral and get your own Toll Free or Local Number with voicemail for as low as $9.99 per month. You also have the option of a fax number with this company also. Great service!

Conclusion:

Now, those are the exact steps that I have taken in order to get my merchants and affiliate programs back. The corporation is only for these affiliate programs, nothing else, any income derived from affiliate sales will be deposited into the corporate bank account. And remember you will have to file a separate income tax return for the corporation. There will also be minor yearly fees associated with keeping your corporation alive. But they amount to just a few hundred dollars a year.

At the time I was dropped by a number of merchants, I was using www.shareasale.com and www.commissionjunction.com . At both of these sites, I was able to go into my “account” and change ALL my information to reflect that of the new Corporation. Address, name, phone number, bank account, etc… Reapply with your merchants that you lost and they will gladly accept you back into their program. Keep your websites running and keep the affiliate commissions coming.

New York State has hit us with a punch I didn’t see coming. They don’t understand what they have done to us as affiliate marketers, nor will they understand the repercussions of what will be, but this will get you up and running again, without having to leave town.

If you found this information helpful, please click through to the Company Corporation by clicking on this link -> The Company Corporation

I do get a commission if you do sign up through me, and as affiliates yourselves, you know how frustrating it is when people bypass this. So, all I’m asking, in return for my time and research, and for preparing this website, is to click through the link.

If you do end up just calling and signing up on the phone (which is an option) I would greatly appreciate it if you would call 1-888-340-7239 ask to speak to an Incorporation Specialist and be sure to mention that you are calling from Affiliate ID# 8232.

Thanks so much.

Don VanPelt