Separate legal entities - like LLC are created for separating business activities from personal and for some level of legal protection - so in case of malpractice LLC would be sued and your personal property would be protected.
Let's put aside issues how good that protection is - none of these are your purpose. You are putting your personal assets into LLC - so in case LLC would be responsible - these assets might be garnished.
Assuming you would go into the business and your LLC would produce $100,000 net income. Generally - you would be responsible for self-employment taxes - but because your wages are above the limit set for social security taxes - you will be a subject only of 2.9% self-employment taxes. In additional - single member LLC is not taxable entity - so all income and expenses are passed through to the member and should be reported on your personal tax return. LLCs that have several members are treated as partnerships - they file partnership income tax return, but do not pay any tax - tax liability is passed to members who in turn report in on individual tax returns. Nevertheless to say that income from business is generally taxed at your regular rate - that is with your income 25% and more - in additional to self-employment taxes.
yes - you are correct - you may deduct some expenses and reduce the tax base - but the issue is that (1) you need to have such expenses (2) expenses should met the IRS definition of being both ordinary and necessary. (An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business). (3) you may not deduct your personal expenses as business expenses unless you are looking for some experience dealing with the IRS...
As you do nothing to produce investment income - I do not see any expenses you may deduct - you do not use any part of your home for business, you do not travel for business, etc - so unless you "make up" some expenses and expose yourself for the IRS - there is nothing or almost nothing you may deduct.
There are some items you might consider for deduction - for instance health insurance premiums - but you are likely covered on your job; additional retirement plan contribution - you maxed employee's contribution - but your employer likely did not may its contribution - traditional small-business retirement plans — such as a profit-sharing plan, Keogh or SEP — allow annual deductible contributions equal to 25% percent of your compensation (if you've set up your business as a corporation) or 20% of your self-employment income (if you're a sole proprietor), with a maximum dollar cap of $46,000 for 2008 - your employer's matching - my wild guess is 3% of your wages or ~$4000 + your contribution is $15,500 - so there is some room to defer taxes of the income from your business - from $100,000 additional income you may put aside additional $20,000 - but $80,000 would be taxable as your regular income.
Eventually you might be able to come down to 15% overall tax liability that you currently have without all these headache.
I would suggest to look into some other items suitable for your situation.
to qualify for a full contribution to the Roth IRA - your AGI should be less than $101,000 in 2008 for single - assuming your 401k contribution and other pre-tax deductions make your eligible for full contribution - but you need to watch closely to loose your qualification. Roth IRA is a such instrument - that you are looking for - it allows to receive income without being taxes neither now nor in the future.
reduced tax rate for dividends that you are taking for granted - may fire back and trigger Alternative Minimum taxes
(AMT) that would push effective tax rate
up to 28% - you need to plan carefully not to get into AMT territory...