Is It Necessary to Create a Separate Business For Investing & Selling Domains?

Years ago I used to buy and sell domains here (and elsewhere) that supplemented my income which came from being a freelance web designer. For taxes, I was always sure to pay taxes on any domain profits, by merging both by domain income with my main businesses profits (web design services). Since the domain investments were pretty cheap, when it came to taxes, I would either expense the domain purchases or treated them as inventory. I was never a high volume seller and the domains I purchased were usually under $300. However, for 2021, I am considering getting back into domaining, even though I have a newer business venture which is selling records and cd's.

My question is (for anyone here who may have more experience) couldn't I just sell domains alongside my record shop business, even though my record shop business obviously has nothing to do with domaining? When it comes to taxes, isn't that perfectly acceptable so long as I keep track of all domain expenses and purchases? I'm only asking because I really, really don't want to create a separate business/entity solely for my domain investments. Any insights here would be much appreciated!

 

Hi

not an account or tax advisor, but

it depends on how much income you earn from domains and whether those transactions are being reported as W-9 or on other forms, that you would receive for previous year.

if above is how you have been preparing taxes and have done so consecutively for a few years, and have not received any audit from IRS, then you should be good.

the only thing i incurred, was audit once for not paying social security tax on reported ppc income.

imo....

 

I answered a similar question here -

https://www.namepros.com/threads/is-a-registered-business-necessary.1207887/

Long story short, you don't need a separate business but there are times it can be beneficial.

Brad

 

There is nothing stopping a business from doing more than one thing, earning income via different ventures and products.

Brad

 

So basically, if I'm understanding you correctly, even though my main business (let's call it ABC Broomsticks) is selling tangible products that have absolutely nothing to do with domains, I can STILL deduct any expenses that are related to buying and selling domains under my company ABC Broomsticks, so long as I'm buying and selling domains as ABC Broomsticks? I mean, I'd never advertise publicly on my ABC Broomsticks website that I also happen to flip domains, I just want to be able to take advantage of deducting expenses related to flipping domains, even though I mainly sell broomsticks as ABC Broomsticks.