Cit Media

(This is the tenth in a series of postings about citizen media business issues. See the introduction here. All of these entries are considered to be in “beta” and will be revised and refined as they find a home on a more permanent area of the Center for Citizen Media web site. To that end, your comments, additional examples, and criticisms are welcome and will be invaluable contributions to this process.)

Regardless of whether you sold ad space, referred people to buy things at Amazon, or hawked a couple t-shirts, as soon as you make money through your website, the government considers you to be in business. Except in rare circumstances, that makes you responsible for reporting income, and paying taxes.

If you are the business’s only owner, you are operating as a sole proprietor (assuming you haven’t formed a legal business entity like a limited liability company or corporation). If you own the business with someone else, you are considered to be in a partnership.

Net income from sole proprietorships and partnerships is taxed as part of the owners’ personal gross income (the income is “passed through”). For IRS purposes, you are responsible for paying self-employment tax (social security and Medicare taxes that add up to a little over 15%) and for filing section SE and section C of your 1040 income tax return if your business revenue less expenses amounts to at least $400. This minimum is good news for small projects, which are exempt from paying and filing if their net income totals less than $400. Partnerships must also file a yearly informational return (form 1065) that says how finances were divided. As with any other income tax, there are likely to be state requirements as well.

An invaluable resource for these matters, the Citizen Media Law Project has recently launched the first sections of its Legal Guide.

“The guide is intended for use by citizen media creators with or without formal legal training, as well as others with an interest in these issues, and addresses the legal issues that you may encounter as you gather information and publish your work online…[it] covers the 15 most populous U.S. states and the District of Columbia and will focus on the wide range of legal issues online publishers are likely to face, including risks associated with publication, such as defamation and privacy torts; intellectual property; access to government information; newsgathering; and general legal issues involved in setting up a business.”

The currently available sections are titled “Dealing with Online Legal Risks” and “Forming a Business and Getting Online“. The latter contains a wealth of national and state-specific information about issues such as taxes, business creation, legal documents, and nonprofit status-an idea that appeals to many citizen media types.

While the term “nonprofit” is sometimes used informally to refer to any organization that does not seek to make money or simply does not turn a profit, the legal definition is a little more complicated. Legal nonprofits are typically corporations that have applied for and are granted tax-exempt status with the IRS for federal income tax purposes. Depending on where it was incorporated, an organization may also be granted exemption from state income taxes.

The fact that corporations, not individuals, are granted tax exemption will probably be a deal breaker for most. Forming and maintaining a corporation requires a burdensome amount of time and paperwork, a host of legally required formalities, and in some states, prohibitively high fees. The Citizen Media Law Project section on How to Start a Business can give you a good idea of what goes into this process.

One way to get many of the benefits of being a nonprofit without all the work is to find a fiscal sponsor. Some organizations will extend their nonprofit status to groups or even individuals whose activities are within the scope of the sponsor’s purpose. This typically involves donations or other transactions going through the sponsor, who keeps a percentage (or charges a periodic fee), before untaxed money is passed along to you. One example of this is Fractured Atlas, which offers sponsorship to artists, acting similarly to PayPal in the way it accepts donations and charges administrative fees to withdraw.

Keep in mind that nonprofits are still responsible for paying taxes on “unrelated business taxable income.” The IRS considers this to be revenue received from any business trade or activity that is ongoing (one-time events, even if they last a week, are ok) and not substantially related to the organization’s charitable purpose. Generally speaking, a good way to gauge whether something is unrelated is if the only reason you have to call it “related” is that the revenue it generates will be used to further the organization’s cause.

Selling ad space is usually taxable, but underwriting or sponsorship-when a company donates money and is simply recognized as such by way of a logo or neutral text acknowledgement-is usually not. Most merchandise income will be taxable unless the sales come from a one-time special event or if the products being sold are directly related to the organization’s purpose (CD copies of your podcast are ok, but not a branded keychain). Affiliate income would almost never be considered related, but donations from the public would (both for you and for your donors, who can write it off of their own personal income tax). Please note that due to the room for interpretation the IRS leaves, there are exceptions to all of these rules. For more detailed information on unrelated business income, including dozens of examples, refer to IRS Publication 598.

If you still have questions about taxes, want to learn more about forming a business, want some examples of fiscal sponsors, or want to research these topics in more depth, much more information can be found at the Citizen Media Law Project. Moreover, you may well need the advice of a tax professional such as a certified public accountant.

(Ryan McGrady is a new media graduate student at Emerson College where he is studying knowledge, identity, and ideas in the information age.)

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(This is the fifth in a series of postings about citizen media business issues. See the introduction here. All of these entries are considered to be in “beta” and will be revised and refined as they find a home on a more permanent area of the Center for Citizen Media web site. To that end, your comments, additional examples, and criticisms are welcome and will be invaluable contributions to this process.)

Not every business model includes the direct exchange of money. A blog or other website can have an economic impact in more indirect ways, such as branding and promotion. While such sites can use affiliate links, banner ads and other means to raise money, they’re much more about playing a supportive role in boosting the career of the author.

Let’s be clear first what we’re not talking about: pure marketing or sales sites. Almost any business’s web site that exists solely to sell a product or service fits into this category.

One group that has learned to use blogs and other conversational media effectively is lawyers, who’ve even created a clever word for the genre: blawgs. The term, which, by most accounts, was coined by Bag and Baggage’s Denise Howell, refers to any blog about law (usually by a lawyer). While the majority of “blawggers” do so in some part for enjoyment, a great professional benefit comes with a well-executed blawg. An ideal situation would have a lawyer so proficient at running her blawg that it was popular enough to directly attract clients. Indeed, Howell says her blog reinforces her expertise, and that people can easily find her via search engines; the result is significant business derived from the brand she’s created in part via the blog.

As Eric Turkewitz explains in his own blawg: “If someone published an article in a legal journal, will that gross them any money? No. Except as an indirect form of marketing as they become known in their field for what they do. Blogging is conceptually no different.” The benefit of blawgging comes from building a personal brand. Such can be seen in examples like MassLawBlog, GrokLaw, and PrawfsBlawg.

The last of those, PrawfsBlawg, is a blawg written by professors of law. Blogging by academics, once widely regarded as professionally dangerous (see Ivan Tribble’s 2005 article “Bloggers Need Not Apply”), has trended towards widespread use as a showcase for ideas and research, not to mention an avenue for getting one’s name out. Just as getting one’s name out could mean more clients for a lawyer, it could mean more (or higher-profile) consulting gigs for an academic. One of the earliest and best threads on the subject is from CrookedTimber in a post that asked academics if and why they write or read blogs. Some of the common themes from the numerous answers involved the idea of personal branding, but other reasons included writing practice, class preparation, sharing and getting feedback on research, and using their blog as a platform to discuss or start work on a publication of some kind.

Eric Gordon, Assistant Professor of New Media at Emerson College and author of PlaceofSocialMedia, says:

While [books and academic journals] are still essential for career building, increasingly, scholars are looking to blogs to assess “what’s going on.” Beyond the assumed affordances of blogging - immediate, networked, participatory - it has taken on a new function of stake-claiming. For instance, I’m working on a book about location-based media and situated computing. If I were to simply write it and wait for it to “hit the stands,” it wouldn’t be until mid-2009 that I could join the conversation. Through my blog, I am able to join the conversation right now by opening up the research process to readers. This is good for two reasons: 1) I can join the conversation, and 2) I can begin building a reputation based on a work-in-progress. With the rapidity in which technologies change, this rapid-prototyping of academic ideas has become essential to intellectual and cultural life. [Disclosure: Eric Gordon is one of my professors and advisors at Emerson.]

Writers of all kinds are using blogs to promote, research, and develop their books. Several examples of this can be found in the comments of this thread on Global Neighbourhoods, which is, appropriately, a blog started in 2004 to promote a book that is still regularly updated today.

Professionals and academics are not the only people using blogs to enhance their careers. AlmostDailyBlog is run by an animator who, since making the switch to computer graphics, found he missed drawing and so created a blog to post doodles. As it became more popular, he started to sell prints and eventually put out a book of them—all stemming primarily from his blog and networking with other animation bloggers.

Business blogs have a similar purpose. Technology companies such as Sun Microsystems and Microsoft have launched a variety of blogs, including a popular CEO blog by Sun’s Jonathan Schwartz. Smaller enterprises benefit, too. ClearAdmit runs a very detailed blog as part of its site dedicated to providing information about MBA schools, programs, and the admissions process. These all serve to build the ClearAdmit name and reputation so that, when the time comes, interested parties may think of ClearAdmit for its off-line consulting services and events.

A word of caution, however: Just as a great blog can build personal brand, a rarely updated smattering of nonsensical or thoughtless entries or a page that looks like it came direct from a public relations department can be more of a drawback than aid. The best blogs have human voices and/or relentlessly useful information; they don’t sound corporate or like a sales or PR pitch. Also, with the rate at which blogs are increasingly aggregated, archived, and referenced on the web, an unflattering moment has the potential to haunt you.

For anybody passionate about what they do and with enough time to commit, blogging is a way to not only develop your own knowledge and skills, but also to share them, get feedback, and (most importantly in the context of this series of postings) to build a personal or business brand. If your only goal is to market yourself in the short-term, you may want to consider other avenues.

(Ryan McGrady is a new media graduate student at Emerson College where he is studying knowledge, identity, and ideas in the information age.)

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In “A Message to Palm Customers, Partners and Developers,” Palm CEO Ed Colligan announces the cancelation of a new product. He writes, in part:

Jeff Hawkins and I still believe that the market category defined by Foleo has enormous potential. When we do Foleo II it will be based on our new platform, and we think it will deliver on the promise of this new category. We’re not going to speculate now on timing for a next Foleo, we just know we need to get our core platform and smartphones done first.

Be sure to read the comments, which combine disappointment and relief with understanding.

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UPDATED

From the Google News blog comes news of a new initiative “Perspectives about the news from people in the news.”

We’ll be trying out a mechanism for publishing comments from a special subset of readers: those people or organizations who were actual participants in the story in question. Our long-term vision is that any participant will be able to send in their comments, and we’ll show them next to the articles about the story. Comments will be published in full, without any edits, but marked as “comments” so readers know it’s the individual’s perspective, rather than part of a journalist’s report.

How will this work? How will Google verify that the people commenting on what’s been written about them are actually the people in question? What kind of data-gathering will this lead to on Google’s part?

The fact that Google is trying this is, in one sense, testament to an abject failure on the part of traditional news operations. With the Net, they could have given people the chance to comment in this way — above and beyond the standard comment published as part of a story or a letter to the editor. They didn’t, and left this opening.

If Google pulls this off, it will be a huge boost for one company — Google — because people looking for responses to news articles will head to the search site, not just to the site of the original story.

It’s a fascinating initiative, no matter what. And it’s not too late for news organizations to get their acts together and give the people they write about a convenient platform of their own — Dave Winer suggests blogs (”Let the readers sort it out”) — to reply.

• More from Steve Rubel, with interesting comments…

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The Silicon Valley company’s general counsel, Mike Dillon, writes that on Monday Sun:

will release our financial information first to the public via our website, RSS feeds and 8-K filing. Then, about 10 minutes later, we will release the information to the traditional private agencies and their paid subscribers.

This is a step forward in corporate transparency — not a gigantic one but nonetheless important. The company is using technology in a smart way, good for investors and regulators alike.

(Via Dave Winer)

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Google has launched a Public Policy Blog that is a model of the genre. A principal author is Andrew McLaughlin, the company’s director of public policy and government affairs (and a Berkman Fellow to boot).

This is the kind of thing Google should do to excess, because the its growing clout — and knowledge of what so many people are doing — is making a lot of folks nervous.

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I criticized JetBlue yesterday for missing an opportunity in its customer-relations debacle of recent days. The company’s failure to use its website smartly, I said, was a missed opportunity.

Today, JetBlue has posted a video by its CEO, David Neeleman, apologizing again for the mess — and offering a “Customer Bill of Rights” that will go a long way toward restoring trust.

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The New York Times, running an interview with David G. Neeleman, the beleaguered chief executive of airline JetBlue, reports that “JetBlue’s C.E.O. Is ‘Mortified’ After Fliers Are Stranded” in last week’s snowstorms. Neeleman’s words to the Times are indeed abject in their regret, and forceful in his intention to turn around a situation that may have hurt his company badly.

Yet there’s not even a hint of this combination of apparently genuine regret and determination on the airline’s website. Not on the home page, where you might expect to find a heartfelt message from the management. And not even on the page you find via the home-page link so matter-of-factly named Operational Interruptions, which is a simple explanation of what’s going on and what passengers can do (not very much) to contact a human being at the carrier.

The news media aren’t the only venue for telling the airline’s new story, or shouldn’t be. The place where a lot of disgruntled customers are heading right now is the website.

By not using the site the way they’re using the traditional media, Neeleman and his colleagues at JetBlue are missing a major opportunity.

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The Consumerist’s readers have ruled: ‘All I Want For Xmas Is A PSP’ Wins Best Flog 2006.

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You might think that corporations are the most top-down oriented institutions when it comes to communications. I suspect that tendency is widely shared — and that unions are among the more reluctant when it comes to embracing conversational media.

This seemed clear this morning during a speech and subsequent workshop this morning with PR people from the National Education Association, the biggest union representing public-school teachers in America. Again again, the discussion came around to what some of the union folks clearly considered the dangers in being considerably more open and conversational with the NEA’s various constituencies.

I urged them to consider the opportunities more strongly than any potential dangers. I say the same thing when offering ideas to corporate folks, and am continually struck by the old-media orientation that persists in both camps.

One of the most telling moments of the session came when we were chatting about whether the union websites should point to their opponents’ sites. To me, this is an obvious thing to do — to create educational portals that lead people to varying sides of a vital national debate over the future of public education. To the NEA folks, this was a lot less obvious, and in at least one man’s view a total nonstarter.

People who are advocating for one side of an issue make a mistake, I believe, when they don’t directly engage with their opponents. I’m not suggesting that the NEA put up prominent links to some of the nuttier organizations that consider public education an evil, not a vital national policy and resource. (Actually, it might be a good idea, given that most rational people would find the NEA utterly moderate by comparison).

But there’s lots to gain, and little to lose, in having the confidence of one’s own ideas to publicly debate the issues. At the very least, it forces people to make a better case for their own views, because the other side(s) will poke holes in flimsy arguments.

We all learn more from people who disagree with us than from people who agree. That argues for more transparency in communications, and more conversation.

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