pood - Im not an IRS expert - but I do know that you can have certain types of partnership corporations where your income form the biz is set against your personal income and you can take so many biz deductions that you can come out taking a loss on your biz and not pay anything - all depends on your individual situation
Also - your comment about not being able to make a living off free sites is definitely out there - I know of many people that are making way more than their old corporate jobs just doing free sites - of course theyve been doing it for 8 months now
Alphawolf - definitely take advantage of getting the sponsors to let you into the sites to choose your own content - it will usually be a little better than the "provided content" on the outside and in a lot of cases will get listed a lot better and at more LLs