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Dec 1, 2015
12:22:40am
Pros and cons
An LLC is generally a good idea for this. A couple of advantages:
1. Better liability protection.
2. Tax advantages depending on how you structure it and how much you make. An S-Corp structure could be very advantageous if you are in the higher earning brackets. For example, lets assume you earn $200k as an IC, but the average person in your field makes a salary of $55k. If you took the entire 200k, your tax rate would be about 28% plus you would be paying employment taxes. However, as an s-corp LLC, you could pay yourself wages of 55k (tax rate of 15%) plus employment taxes and then take the remaining amount as profit distributions under a capital gains tax rate (probably about 15% in this scenario) but without the employment taxes. Thus, you end up paying a rate of about 15% rather than 28% and a whole lot less in other employment taxes. That can result in tens of thousands of dollars in savings each year.
3. More professional. Professionals operate under a corporate entity. Handymen and semi-employed people operate without legal entities because they have no assets to lose.
4. Write-offs: Many of the things you do in the business can be more easily classified as expenses and thus not as income. If it is an expense, it isn't taxed. You can give yourself a company car, a portion of your home that you use for the business, a cell phone, etc. depending on the use. Talk to an accountant to figure out how aggressive you want to be.
5. Branding: Some people are not comfortable with their own name as the brand. It is easier to have a business card with a brand for your LLC than a brand for you as a person.

Disadvantages:
1. Setup cost
2.Tax cost. I find that an accountant will charge about $400 to prepare a very simple LLC tax return. More if you are doing more complex things.
3. Hassle. In order to take advantage of an LLC, you need to keep the corporate formalities in place. For most people this just means having a separate bank account and using it that way (don't comingle your personal expenses).
CocaColaRecovery
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CocaColaRecovery
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