Domain sniffing, legal entities, domain donations: 10 things every domainer should know.
An article published at Aviva Directory is perhaps the most straight-forward, best-researched legal article that every domainer — newbie or experienced — should read.
The article covers some of the basic of domaining, such as trademarks, but also covers a variety of topics many domainers may have never considered (such as which form of legal entity to form, how to avoid “piercing the corporate veil, etc.)
1. Domain sniffing – how you can legally go after someone for “sniffing” a domain you query
2. Trademark issues – most experienced domainers know about trademarks, but here are some good examples
3. What legal entity you should use for your domain name business
4. Where you should form your legal entity if you are in the U.S.
5. Piercing the corporate veil – I suspect few domainers actually are aware of this problem. Even if you set up an LLC or S-Corp to run your domain business, you need to be sure to have controls in place to separate your personal and business finances.
6. The distinction between your domaining business as a hobby or business
7. Donating domain names – The article references previous Domain Name Wire articles on the subject. My recommendation remains to not donate domains to charity to take a “fair market value” write-off.
8. Employees v. Independent contractors – this is important as your business grows
9. Inaccurate registration – again, references the GoDaddy fiasco Domain Name Wire broke earlier this year.
10. Depreciating vs. Deducting domains – a complicated tax issue that few people agree about
This article is a must read for all domainers.
Ruben Rodriguez says
“Consider that if you can’t beat them, you might as well join them. If you come across inaccurate Whois data you can report it to the registrar. If in fact the information is inaccurate, you might get a shot at buying the domain.”
Part of me says “raise the Skull and Bones, mates”. Another part says “geez.” This explains the rash of contact info requests I’ve gotten from the registrars I no longer use to register domains. I haven’t gotten around to transferring them yet to my current registrar, since I’m beginning to suspect there’s a good reason they spend so much on PR.
I don’t understand the logic. ICANN requires public registration records, yet registrars are allowed to profit from upselling contact privacy. Shouldn’t those domains who use contact privacy to shield registrations also be fair game?
The article didn’t go in depth into the tax treatment of the sale of domains. It has been my understanding that the sale of a domain owned longer than a year receives capital gains tax treatment.
The article was very informative though, and I’m not knocking it. I have read that there are also unsettled legal questions regarding the status of domains. Is a domain name a lease, tangible property, or intellectual property etc?
Ruben Rodriguez says
I forgot to mention that the registrar inquiries began after listing the sites for sale at Sedo. I raised my prices afterward.
Here\’s a link to an article regarding an attempt to wrest away a trademark using \”abandonment\” as an argument:
http://tinyurl.com/3e3dur
Andrew says
Ruben, see http://domaintaxguide.com/ about your tax questions
Ruben Rodriguez says
Thanks Andrew, does the pointer include the bucks for the guide?:)
Here’s a better link:
http://www.irs.gov/taxtopics/tc409.html
I bought my first domain in 1998 and ran it as a website. I sold the name earlier this year. (I brought my own buyer to the table, but that’s another story)
What I was trying to articulate was that there are still unresolved questions on whether a domain name is, I guess, tangible or intangible:
“Intangible Property is property that has value but cannot be seen or touched.” -IRS
I’m not denying I’m ‘domainer scum’ or anything, but most of the domains I own were purchased for development. I’m at 20 something sites so far and just launched another this morning.
Man, those round robins get longer and longer.
Thanks for fixing the long URL. I tried tinyurl once several years ago and the interaction annoyed me, so I haven’t used it since. Usually I just tell people to suck it up and copy it to Notepad.
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Andrew says
Ruben, the tax guide tells you whether you should base your taxes on the capital gains model or another. Personally, I think we won’t get clarification on this for several years.
Those long URLs don’t always wrap, so that’s why I like tinyurl.