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CGCPA
CGCPA, CPA
Category: Tax
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Experience:  over 40 years experience in tax matters
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I currently have a sole proprietorship in Pennsylvania that

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I currently have a sole proprietorship in Pennsylvania that I've been thinking of converting to an LLC. My lawyer has advised me that, due to a lack of real liability issues for my profession (I'm a comic book writer), I should only consider forming an LLC if there are tax benefits for me to do so. Can anyone give me an overview of what sort of tax benefits an LLC might give me over a sole proprietorship (if any)? I have no employees (and am unlikely to ever have any) and would be the only member of the LLC if it existed. Thanks.
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

As a single member LLC your income taxes would be filed using Schedule C of Federal form 1040 just as they are now. Therefore there would be no tax advantages. The only advantage of any substance would be in the area of legal protection.

 

An S Corporation would have another advantage for you and is worth considering. It would permit you to have the S Corporation hold ownership to all copyrights thereby enabling you to transfer that to your heirs at some future time. At the same time you would acquire the legal protections of an LLC. The disadvantages to a PA S Corporation are formation costs which can be a bit high. They may not be as expensive as the LLC , however, since an LLC has publishing requirements.

 

In summary, an LLC offers you no tax advantages but does offer legal protections. An S Corporation offers the same legal protections as the LLC and has the added advantage of transferability of copyrights to future generations.

CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
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