Hello. My name is Queeneth, an attorney with 8+ years of experience. Which state does your question pertain to?

Thank you. Here’s an overview:

• LLC (single-member, default tax): Easy setup/maintenance. Taxed on Schedule C. All net profit subject to self-employment tax (15.3%).
• LLC taxed as S-Corp (via IRS election): Still an LLC legally, just taxed differently. You pay yourself a reasonable W-2 salary (payroll taxes apply). Profits above that are distributions not subject to SE tax. More admin: payroll setup, quarterly filings (e.g., Form 941), year-end W-2; usually use a payroll service.
• When S-Corp makes sense: Often once net profit ≥ ~$60k. Below that, admin costs can outweigh tax savings.
• One LLC vs. two: You can run multiple lines under one LLC (use DBAs and clean books).
• Consider a separate LLC if: different liability profile (scraping: contracts/IP/compliance), separate brand, or you want clean financial separation. Each additional LLC adds cost/filings/bookkeeping.
• Selling online nationwide: Usually no foreign registration unless you have physical presence (employees/office/warehouse) in other states.
• Taxes (high-level): Many states don’t tax pure digital services, but rules vary; Colorado generally doesn’t tax most digital services. Income tax is generally where you’re domiciled (Colorado).
• Rule of thumb: Under ~$60k net: stay default LLC for simplicity. Expecting ~$100k+ net: consider LLC + S-Corp election.
• Scraping carries legal risks (CFAA/ToS/IP/privacy), so a separate LLC for the scraping brand can be prudent.

The IRS doesn’t give a single number; “reasonable salary” = what someone in your role would be paid:

• Consider industry pay (e.g., data engineer/scraping contractor in your market), your duties (hands-on vs. managerial), and company profits.
• Common benchmark: 40–60% of net profit as W-2 salary, remainder as S-Corp distributions.
• Red flags for audits: salaries that are too low (e.g., $10k on $200k profit) or no salary.

S-Corp admin to expect:

• Run payroll with withholdings; quarterly payroll filings (Form 941); year-end W-2; unemployment insurance.
• Many use Gusto/ADP/QuickBooks Payroll (~$40–$100/month).
• File 1120-S annually; issue yourself a K-1.
• Budget for a CPA ($1k–$2k/yr), typically offset by tax savings at higher profits.
• Potential benefits: solo 401(k), certain health reimbursements (special rules for >2% shareholders).

Formation steps for the new entity:

1. File Articles of Organization in Colorado.
2. Get a new EIN.
3. Make S-Corp election (Form 2553) within 75 days of formation (or by next year’s deadline).
4. Keep your existing freelance LLC as a disregarded entity if you like, and run the new one as the S-Corp.

Legal risk notes for scraping (high level):

• CFAA (18 U.S.C. § 1030): Risk if access is “without authorization”—e.g., behind logins/paywalls or bypassing technical blocks.
• Terms of Service (ToS): Violations can lead to breach-of-contract/unfair competition claims, even if not criminal.
• Copyright/Database rights: Avoid reproducing proprietary or creative content at scale.
• Privacy laws (GDPR/CCPA, etc.): Be careful collecting or selling personal data (emails/phones/locations).

Lower-risk practices:

• Stick to public web pages (no login walls/paid content).
• Respect robots.txt (not binding, but shows good faith).
• Throttle requests to avoid service disruption claims.
• Aim for transformative use (analytics/insights, not republishing raw data).
• Avoid sensitive personal info unless you have clear legal grounds/consent.