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Freelancers, in the midst of everything else going on, you should probably create your LLC before the new year. No idea what the final tax bill will look like, but 100% it will favor an LLC over a self-employed freelancer.
66 replies and sub-replies as of Dec 03 2017

For freelance-type work, there's a lot of good reasons to do business as an LLC, regardless, but there's about to be a whole lot more.…
It’s the S Corp part of your incorp that’s providing the tax benefits. You can also get an EIN as a sole prop.
Right. For CA in particular, you have to do more corporate feng shui, but you can't become an S Corp without first creating an LLC.
I'm trying to figure out if with the standard deduction boost will end up a wash... But I am definitely freaked out
Gotta talk to an accountant for that, but it probably will. It also let's you essentially cut your self-employment tax in half because of the way you have to pay yourself. I Am Not An Accountant.
Yeah, California was the worst of the states I've been in, but it was still quite a lot of savings.
She told us that the state taxes would crush us if we went LLC.
It's high, but for us it got offset by also structuring as an S Corp, which cut the self-employment tax in half. California knows most new companies never make any money, so they hit you hard. There's a reason so many big companies have the same address in Delaware.
You are both very uninformed. Please please get better CPAs. Accountants aren't CPAs FYI
Yeah just like trump does for everything. Hundreds of LLC under his name
Good advice for us all.
Thank you. That's so kind of you to point this out to ppl.
Thanks for the advice. Do you have recommendations on the best way to proceed with that?
Those cost money too & to keep up though!! 🤣
No. Not 100% true. If you have specific lang to cite pls provide but incorporation provisions vary state by state. 1 person LLC may be same as sole prop.
Single member LLC can be or is considered a disregarded entity, so please consider local state laws before going down this path.
This is true. If you choose to become a LLC you either default to a disregard entity or you can do the entity classification election to elect either a s or c corp tax structure. Each come with specific tax requirements and can be expensive. Speak with a pro if you’re unsure.
Caveat: if you change from sole proprietor to LLC mid-year, you may have to file two tax returns. Consult your tax attorney/CPA.
Thank you, Doctor, that's a point well taken. For a neophyte entrepreneur such as me, incorporating was starting to seem like a prudent strategy already.
I also shudder to think of what I'd find if I tried to plumb the depths of the new tax legislation, part of which — did they scribble it on napkins? Best to keep a close eye on those liabilities, like semantic piranhas....
I needed this reminder. Thank you for this, seriously.
The IRS treats an LLC as a "disregarded entity", so it goes on your personal taxes, unless LLC files an election to be taxed as a C Corp. I haven't heard any hint that the so-called tax "reform" will change that. Being taxed as C Corp can be better or worse.
then I'm getting a company car, preferably a K5 like Chief Brody drives in Jaws
How’s that? LLCs are disregarded entities for federal taxes. I have an LLC, but so far as the IRS is concerned it’s all just personal income. In TN, at least, LLCs aren’t corporations.
Interested to hear a response. I’m not sure — have a LOT of freelancer writer friends that I’d love to help. Personally, I’m concerned about losing the home office deduction.
As a freelancer, you pay taxes on all income then file for deductions. As an LLC, you only pay things like employment tax on profit, so operating expenses come out before you pay yourself. Which could save a lot of freelancers if they lose the home office deduction.
An if you elect to be structured as an S-Corp after creating an LLC, things get even more interesting. Caveat Tweetor: I Am Not An Accountant.
Not in TN. 😕 you have to go at least S-Corp for that here, which is costly and has many more filing burdens and regulations.
Weird, S-Corps in MD don't file state tax returns at all. S-Corps are great for Fed taxes, state taxes are going to vary tremendously.
No, as a sole proprietor you can still fill out a schedule c and then you're only paying taxes on your profits. No LLC needed.
Yes, this basic misunderstanding of how taxes work is driving me crazy. I think the only deduction affected on the Schedule C is entertainment expenses.
Would be interested to hear more about this...
My spouse, the tax attorney, confirms this. In fact, any professional w/significant income would benefit from forming an LLC and working as a contractor Instead of an employee (lawyer, nurse, etc)
its tricky trying to circumvent being an "employee" vs. "contractor" IRS doesn't like this one bit...even though audit rate for LLCs is less than 1%...its best to consult a tax professional....
Freelancers (contractors) forming LLCs vs employees shifting to contractors are wildly different things. Not sure there's much upside to going from employee to freelance/contract, MIGHT be an upside of freelance/contract to --> employee or LLC. Short of it: consult a tax pro.
The laws and steps are different depending on your state. You can do it yourself (many people do!) or hire a lawyer to do it for you. Definitely talk to your accountant about it first!
Thanks! If I were to do it myself, do you know of a website that tells me what to do?
I don't. I actually hired someone to do mine for me. But if you look up your state + LLC, I'm sure you can find something!
do you recommend authors establish themselves as an LLC? My book comes out in January. Uncharted waters for sure!
Definitely a convo to have with your accountant! I only recently did it. :)
Ok! Thank you! :)
Absolutely. The new laws will heavily favor LLC. I would give more advice, but i need to finish this degree first. So talk to a CPA. 👊🏻
I'm about to start my first independent contractor gig (outside of grad school) doing research for the government. I'm not sure what I'll be doing for a career yet but I like working freelance. When should I start thinking about making an LLC?
It’s not a bad idea but we should all talk to our individual tax professionals before jumping in and know the trade offs. Been self employed 15 years and been fine (but that could change). Also any info on the home office deduction?
Who knows? The new tax bill hasn't been passed yet.
My guess is a lot of the really nasty, politically toxic stuff like killing the HOD and the #GradStudentTax will disappear in the final bill as trade-offs for less obvious but just as economically destructive corporate loopholes.
Apart from the tax discussion, an LLC separates your personal assets from your work assets in case of lawsuits and such.
But there's nothing stopping somebody from suing you personally, whether you have an LLC or not. Esp for libel.
We're all going to be LLCs eventually.
I don't make enough money to be required to file
Isn’t an Uber driver a freelancer ?
It's probably real a very good idea for most people. I'd recommend 2017 being the year that every self employed person see an aggressive CPA. Time to get a professional to set you up right. Then you can go back to doing it yourself.
re: the final tax bill, the self-employment deductions getting axed may be a misinterpretation… but paying a good tax pro for personalized advice is the best money you'll spend every year
Stop Panicking: The Tax Bills Don't Eliminate Your Business Expense Deductions
There have been some bad readings of the tax bills circulating.
I've been dragging my it's time I make it happen! Tips anyone?