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I have a question about forming an LLC (and possibly an

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I have a question...

I have a question about forming an LLC (and possibly an S-Corp)

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I have a normal day job that I am a regular W2 employee. However, I do some side contract work that pays me roughly 20-22k a year as a W9. I have normally just paid taxes off of that...but I have heard if I form an LLC and then possibly an S-Corp and then pay myself out of that, it could save me a decent amount of money. Is that true?

Submitted: 1 month ago.Category: Finance
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1/1/2018
Financial Professional: Lev, Tax Preparer replied 1 month ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 31,277
Experience: Personal Investment, Tax Preparation
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Yes - that is correct information - you may have some saving on self-employment taxes if select S-corporation tax treatment for your LLC.

However - there will be additional overhead for filing S-corporation tax returns - income tax return and employment tax returns.

So - we may expect actual tax saving when your NET business income is about $40-$50k.

In your situations - for tax purposes - you might better to remain self-employed.

If you are looking for some legal protection or want to have separate business entity for other reasons - you may have a single member LLC and still file a self-employed on scheduled C.

For tax purposes that will not make any difference.

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Customer reply replied 1 month ago
How about as a straight LLC. Any benefits there?
Financial Professional: Lev, Tax Preparer replied 1 month ago

For tax purposes - a single member LLC is classified as disregarded entity.

"Disregarded" means ignored for tax purposes - and all business income and expenses are reported on your individual tax return - schedule C - as if there were no any LLC.
So for tax purposes - having an LLC will NOT make any difference.

For other purposes - depending on your circumstances - there might be some benefits - such as legal protection and separate business entity - with a different name and separated bank account.

But whether you will have any real benefits depends on your circumstances and type of business operations.

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Financial Professional: Lev, Tax Preparer replied 1 month ago

I appreciate if you take a moment to rate the answer.
Experts are ONLY credited when answers are rated positively.
If you still have any doubts, need clarification - please be sure to ask.
I am here to help you with all Social Security / Tax related issues.

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Satisfied Customers: 31,277
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