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Author Topic: Idea for a business, is it legal?  (Read 1254 times)
skittixch
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May 13, 2011, 04:37:19 AM
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A few friends of mine are involved in a startup that works with local companies to set up ecommerce systems, and I had an idea to link up with their service, and set up a bitcoin point of entry.  My idea involves doing on-the-fly price conversion of products, and taking bitcoins in the value of the item based on the current exchange rate. I would then automatically trade them with the lowest ask at mtgox (and future distributed peerfinders). Last, I would place the order with the seller, and use a credit card tied to an account with a moderate amount of capitol to fund the order, effectively making the transaction from a to b instant. My payout as the middleman would probably be something very small like 1% in btc.  I just want the service to exist, and get a little passive income.

I'm aware that I need to figure out a better fraud protection, but unless someone can convince me otherwise, I'm not too worried about double-spending at the moment.  With enough startup capitol (scalable), I can easily cover the gap from when I need to give money to the seller, and when I would receive money from the exchange.

I'm unclear about the legality of what I'm doing.  If by ordering a product and facilitating a transaction, I am a middleman.  Does the fact that I'm working with bitcoins mean I'm a money changer?  What sort of tax laws am I stepping into?  If this is he kind of question you usually pay someone experienced to answer, I'm open to suggestions for avenues, as well as incentive in btc for expert advice.  Thanks all
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Anonymous
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May 13, 2011, 04:57:35 AM
 #2

Think big! -  use your system as an amazon or newegg gateway for btc.


Amazon already pays the applicable tax Smiley
skittixch
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May 13, 2011, 05:04:54 AM
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Think big!

I'm just not the person who's meant to do that.  I'm looking at this opportunity to work with people I know, and get a piece of the action by adding a functional component onto their thing, benefitting us as a whole.  If someone approaches me/us with a way to scale it up, I'd be happy to listen though.  I still need to know what I'd be getting myself into in the first place though.
BitterTea
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May 13, 2011, 05:20:02 AM
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IMO, the important question isn't "is it legal?". The important questions are "is it moral?" and "will you be caught?".

Anything using credit cards seems risky to me...
skittixch
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May 13, 2011, 05:26:18 AM
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I only say credit cards, because that's all I know.  Is there another way to move money in such a way that I can take it from one pile, and give it to the business attached to an order instantly?  I'm trying to avoid them having to deal with btc.  I think it'd be a much harder sell if I had to sell them on the worth of bitcoins rather than just offering what they're familiar with.
Anonymous
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May 13, 2011, 05:26:58 AM
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Youd need to keep track of the items value at the time you sold them and declare that.

Much the same as you would any other transaction as a company.

Possibly capital gains tax on the rise in value of btc when you come to sell them. Or correspondingly a loss.
skittixch
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May 13, 2011, 05:31:07 AM
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Youd need to keep track of the items value at the time you sold them and declare that.

Much the same as you would any other transaction as a company.

Possibly capital gains tax on the rise in value of btc when you come to sell them. Or correspondingly a loss.

But if the business pays all appropriate taxes, and I only bring in my 1%, do I still need to pay taxes on all the money that's passed through my hands?  or do I just tabulate my total gain over the course of the year and pay on that amount?
Stephen Gornick
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May 16, 2011, 04:35:43 AM
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Related: An excellent summary of legal areas that might be relevant to bitcoin (from the perspective from within the U.S.):
  - http://www.quora.com/Is-Bitcoin-legal

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