Does an Internet forum have to register as business?

Posted on 2011-05-11
Last Modified: 2012-05-11
Not a great EE question but nonetheless one I don't know the answer to and someone here probably does!    Don't worry if you only know your countries system - we can Google the equivalent for the UK.

We are a forum that generates money via donation. We also have a separate system where a member pays money they can sell goods using a small portion of our site. We are very much not for profit but always have enough money to pay for our server hosting and domain name. We pay VAT for everything and our staff are volunteer unpaid.  In short, all money goes back into the forum and we keep a spreadsheet of all incoming and outgoing.

Under these conditions, do we have to register as a business and what sort should we consider e.g. sole trader, private limited? We don't really want to be seen to pay a director.

If yes, then can I assume we have to do a tax return every year?

If we don't have to be a business, could you tell me briefly why?

I'd also welcome any comments with example websites shown - or people's experiences.

Thanks guys!!
Question by:mowglii
    LVL 25

    Expert Comment

    Take a look at the 3 instructions listed here:

    I was president of a non profit organization in the USA, and we had to file a tax return.
    We took in monies from members and gave it back as prize money.

    We needed a Federal Tax ID number.

    In the U.S., non profit groups are normally called non profit "organizations", NOT businesses.

    However, if you have a business this does not mean you are making alot of profit. There is no law, that if you are a "for profit" business that you must make a profit of X dollars.

    What expenses will you have to run your business-organization?

    Your members who sell goods, when they receive monies, if THEY are self employed, then they would report their sales on their own personal or business tax return.

    I was self employed in 2008 and though I had no employees, I still filed our tax form called "profit or loss from a business."
    On this form were places to enter my expenses. (maybe business use of my vehicle, maybe paid helpers, maybe office supplies, etc.)

    You may have certain restrictions in declaring yourself "non profit."

    The above link should give you some basic information to get started.

    LVL 17

    Expert Comment

    In general, a for profit corporation is owned by the owners and exists to make profit for the owners.  The owners maintain control and can sell the business.

    In general, a not for profit corporation (organization) exists to serve a public purpose.  It is owned by the public and the "founders" frequently lose control - they don't own it.  It is much more open to the public and usually has much more recordkeeping requirements (necessary to prove non profit status).  If it is closed down all the assets must be given to another non profit with a similar purpose - it cannot be sold.

    LVL 26

    Expert Comment

    by:David Brugge
    It is ALWAYS a good practice to direct your tax questions to the taxing authority of your jurisdiction. In your case, I suspect, the HM Revenue and Customs office, or to a competent accountant.

    If you get hauled into tax court, It will do you precious little good to tell the magistrate that you got your advice from EE.

    If you do talk to the Revenue folk, probably best to ask them general questions at first without identifying your organization, and only identify yourselves when absolutely necessary. Sometimes you can set off an inquiry when you didn't mean to.


    Author Comment

    Thank-you very much for your thoughts on this.

    So the basic gist is to get in touch with the HM Revenue and Customs office and explain the situation.  The first comment mentioned organisation as opposed to business - and this is a key word here.  We're not a business but we want to be more efficient with our money and do things by the book so that there should never be any question of what to do if HM Gov ask.

    What I don't want to do is get so involved with tax office so as for them to take the opportunity to jump on us.  We'll have to look at the last few years in our own time while we build the picture up.

    In general, a not for profit corporation (organization) exists to serve a public purpose.  It is owned by the public and the "founders" frequently lose control - they don't own it.  It is much more open to the public and usually has much more recordkeeping requirements (necessary to prove non profit status).  If it is closed down all the assets must be given to another non profit with a similar purpose - it cannot be sold.

    This is interesting.  Contracts are not signed under the name of the forum but an of the members.  Worth looking into.

    The other day I was chatting to someone about business ideas and they said to me, "you know, businesses don't have to be in profit".

    At the end of the day I trawl the UK's forums weekly and don't see any evidence that these people are doing things any differently i.e. a spreadsheet or a simple book of money in/money out.

    Give us a couple of days and we'll start putting some points out and closing this off.  Thanks for your help!
    LVL 25

    Accepted Solution

    The word "Business" sounds like "profit."

    A friend of mine is going to host a foreign student. The student exchange "program" is non-profit.
    The organization that I was a member of and president of for a couple years was non-profit.

    Program, Group, Organization, all sound less "profitability abrasive" than business.
    Businesses hire employees, etc.
    The student exchange uses "volunteers."

    The UK may be different, but in the U.S. non profit organizations are required to have a Federal Tax ID number, so they can report their income and also report where it went, so as to leave them non-profit. We took in membership fees and entry fees. When the last sporting event of the year was played we gave all remaning monies out = empty bank account.

    Your country may have very different rules. You could contact your Department of Revenue and ask for the forms that are needed to be filed by a non profit "group."
    Let them send you the forms, and look at the forms to get an idea of the "numbers" you have to report.

    In the USA the IRS is more alert to phony non profit groups.
    A "for profit" business can be under less scrutiny than a non profit group that takes in alot of revenues.

    Good luck.
    LVL 25

    Expert Comment

    Did any of the information I gave to you, help you in any way?
    LVL 31

    Expert Comment

    by:James Murrell
    This question has been classified as abandoned and is closed as part of the Cleanup Program. See the recommendation for more details.

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