Mining under a ltd company

[Kaplant4]

Is there any benefit to setting up a limited company and mining as such rather than mining personally?

[1714882103]

1714882103

[NotFuzzyWarm]

Depends on your country.
In the US, most definitely because section 179 of the US Tax Codes allows you very significant deductions for cost of the hardware and you can also deduct all other normal business expenses. ref https://www.irs.gov/publications/p535 and https://bench.co/blog/tax-tips/small-business-tax-deductions/ and my favorite - https://www.section179.org/

[joniboini]

-snip-

You should stop spamming this on various threads. Just create your own ann thread or promote it through your signature space. 
OP, if you have a lot of rig, maybe running your own company is also beneficial from a practical perspective. At least you can hire some people to manage them. But as mentioned above, tax is probably the main reason.

[Kaplant4]

Thanks all, would it also help from a financing perspective i.e. Getting a loan backed by the miners?

[NotFuzzyWarm]

Most folks here will tell you that getting a loan to purchase miners is a very bad idea because it is exceeding risky. Nothing about mining is certain and there is always a good chance that things will not go as you planned. If things go wrong the last thing you will want is a loan hanging over your head.

Now, if you already have some miners and they are providing stable income - and assuming your bank is good with using that income as an asset - you could use that record of income to aid in getting a business loan for other things but I would still be wary about it.

[flip4flop]

You should definitely consult a tax attorney if you are in the United States. Find one that is knowledgeable on BTC and cryptocurrency in general before you start talking any additional details. In general you should be able to deduct certain expenses as a business under certain entities, but they would give you much better advice to protect yourself from being audited. Even if you were at least you would have someone on your side that could help you through it.

[Tsub]

Is there any benefit to setting up a limited company and mining as such rather than mining personally?

We started as a personal mining operation and quickly filed an LLC.  There are several things you need to consider:

1.  Section 179 deduction (brought up before and is an excellent point).  Basically, until you make more than you paid for the miner, no taxes.

2.  Miner insurance.  As a business entity, you can begin (and I mean begin) to find some levels of insurance for miners.  General Business Liability for crypto mining companies is essentially non-existant, but property coverage is key.  What if they get stolen?  Burn up in a fire?  The rates are high, but with a pretty large investment in mining equipment, I don't want to start over with no type of offset.

3.  Personal Liability.  This is still an emerging space, especially regarding what liability a mininig company can have, but if you hosting in someone else's facility, and your rig bursts into flames, can they sue your LLC / Corp, or will they try to sue you personally for damages to the building, etc.

4.  Taxes.  I keep my crypto mining gains/losses separate from personal, use crypto mining software to help track what I am making and so its mentally separate from my personal bank account. 

5.  Banking.  Banks do not want to open accounts for Crypto Mining companies.  Even a simple checking account.  I found 1 that is actually got their head on straight.  Mercury bank is an online bank.  I am not advocating, I am just sharing what I ended up with after trying at 10 different banks.  Even the "crypto friendly" banks are BS because they want $50k or 250k average balances.  For small operations like us, I would rather run $10k in an account and pour $40k into miners.

6.  Access to capital.  There was a warning about using leverage to acquire equipment.  You have to decide that on your own.  We poured a significant amount of capital into our starting equipment footprint, but wanted to grow more.  So we added leverage.  You can't get "equipment loans".  I have tried both equipment purchase and leasing and it just doesn't really exist until you get into the $2M+ level given institutional scale debt is available, but not for the small guy.  I found 1 lender who gave me an equipment focused business loan, but it is a 3 year, high single digit loan.  We can talk offline, but its about starting somewhere and building a relationship.  I have heard of folks using zero-interest credit cards and then paying them back with mining profits but its a forward risk if crypto drops sharply, build a reserve so you can just pay it off.  I have seen working capital loans (we did this route) to expand the fleet, but they are longer term 3 - 7 years at low teen fixed interest.  We can absorb the payment if everything falls apart, but it is an option.    Leverage at your own risk.

I hope this helps.

[Divax]

Is there any benefit to setting up a limited company and mining as such rather than mining personally?

We started as a personal mining operation and quickly filed an LLC.  There are several things you need to consider:

1.  Section 179 deduction (brought up before and is an excellent point).  Basically, until you make more than you paid for the miner, no taxes.

2.  Miner insurance.  As a business entity, you can begin (and I mean begin) to find some levels of insurance for miners.  General Business Liability for crypto mining companies is essentially non-existant, but property coverage is key.  What if they get stolen?  Burn up in a fire?  The rates are high, but with a pretty large investment in mining equipment, I don't want to start over with no type of offset.

3.  Personal Liability.  This is still an emerging space, especially regarding what liability a mininig company can have, but if you hosting in someone else's facility, and your rig bursts into flames, can they sue your LLC / Corp, or will they try to sue you personally for damages to the building, etc.

4.  Taxes.  I keep my crypto mining gains/losses separate from personal, use crypto mining software to help track what I am making and so its mentally separate from my personal bank account. 

5.  Banking.  Banks do not want to open accounts for Crypto Mining companies.  Even a simple checking account.  I found 1 that is actually got their head on straight.  Mercury bank is an online bank.  I am not advocating, I am just sharing what I ended up with after trying at 10 different banks.  Even the "crypto friendly" banks are BS because they want $50k or 250k average balances.  For small operations like us, I would rather run $10k in an account and pour $40k into miners.

6.  Access to capital.  There was a warning about using leverage to acquire equipment.  You have to decide that on your own.  We poured a significant amount of capital into our starting equipment footprint, but wanted to grow more.  So we added leverage.  You can't get "equipment loans".  I have tried both equipment purchase and leasing and it just doesn't really exist until you get into the $2M+ level given institutional scale debt is available, but not for the small guy.  I found 1 lender who gave me an equipment focused business loan, but it is a 3 year, high single digit loan.  We can talk offline, but its about starting somewhere and building a relationship.  I have heard of folks using zero-interest credit cards and then paying them back with mining profits but its a forward risk if crypto drops sharply, build a reserve so you can just pay it off.  I have seen working capital loans (we did this route) to expand the fleet, but they are longer term 3 - 7 years at low teen fixed interest.  We can absorb the payment if everything falls apart, but it is an option.    Leverage at your own risk.

I hope this helps.

Thank you for sharing your experience! Very useful!

How do you go about showing revenues for accounting and converting to fiat to cover your opex?