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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3168
Experience:  IRS licensed Enrolled Agent and tax instructor
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If I own an llc in 100%, can I bill it for my consulting

Customer Question

If I own an llc in virginia 100%, can I bill it for my consulting time.
The scenario is I will be employed by another company until I transition to the LLC
and would be working on IP and patents to be transferred to the new LLC.
Submitted: 11 months ago.
Category: Tax
Expert:  emc011075 replied 11 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Is it a single member LLC or corporation or Scorp? Are you W2 employee or 1099 contractor?

Customer: replied 11 months ago.
It would be an LLC as there will be investment coming in, currently I work as a sole proprietor
but prefer to phase out of my present job over the next 4-5 months as I have a lot of commissions due
to me.
Expert:  emc011075 replied 11 months ago.

Single member LLC or have to opt to be taxed as corporation or scorp?

Single member LLC is a disregarded entity for tax purposes, which means is taxed the same way as sole proprietorship. If you are already sole proprietor, nothing will change or transition. You just start using the new name and EIN.

Customer: replied 11 months ago.
I would expect the LLC to be more like a corporation structure, I would
assume any partners coming in would expect it structured this way.
I will be issuing shares.Basically before I start taking any pay from the LLc I prefer to bill it
from my home office . Is this legal
Expert:  emc011075 replied 11 months ago.

To be taxed as corporation you will need to elect a corporate status and put yourself on payroll. You will become employee of your own corporation. If you add partners you can become a partnership or elect to be taxed as corporation or scorp. If you keep single member LLC you will NOT be working for your LLC, you will be the owner of your LLC.

If you want to issue shares you will need to create a corporation.

Expert:  emc011075 replied 11 months ago.

LLC mean limited liability company. It is not a separate entity or corporation. LLC can be single member LLC (sole proprietorship), partnership or if elected Scorp or Corporation. An LLC will give you limited liability protection like a corporation but it keeps your taxes simple. A partnership is little more complex, a separate partnership return is required, but it is still a flow through entity (your partnership profit will be taxed on your individual tax returns).

Expert:  emc011075 replied 11 months ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

Customer: replied 11 months ago.
Back to the original question, what is the best entity to create then, I am currently employed by another company
and would like to phase away from them about 4 months after investments come in. If I own the entity, can I bill
consulting time only until I come in full time.And is it legal, I would be paying taxes personally on the billed consulting.
Expert:  emc011075 replied 11 months ago.

There's nothing wrong with a LLC. If you are working as 1099 consultant you are already paying taxes personally. LLC is a legal entity, it is just disregarded for tax purposes. All reasonable and necessary expenses are deductible, regardless what entity you form. For a start up small business a LLC is a perfect choice. A corporation usually comes with more legal hassle and more filing requirements (separate tax returns, quarterly payroll returns, limited loss deductions, state filing fees.... ).

I am not exactly sure how do you want to "bill the LLC". You do not work for the LLC, you are the LLC and if you create a corporation, the employer would have to hire the corporation, not you personally.