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06-17-2019, 08:20 PM | #16 | |
Buddy Christ is a Chiefs fan
Join Date: Nov 2008
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06-17-2019, 08:28 PM | #17 | |
Supporter
Join Date: Apr 2007
Location: Scott City KS
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Is it IT? If that's the case then you wouldn't necessarily need to set up an entity. They will just give you a 1099 and it will go on a schedule C. You'll owe SE tax (both the employer and employee portions of Social Security and Medicare), which sucks. No one hates tax more than this ****ing guy, but hey, you get to keep the net. If you set up an LLC as a single member LLC it will go on the C. Same tax situation. If you tax it as a partnership there is a flow through return but it will be taxed the same. If you set it up to be taxed as an S Corp there is no SE tax, but you have to pay a reasonable wage, which the entity will have to pay the Social Security and Medicare, so, like Crow said, unless you're looking to do something other than just take all the money out, it is taxed essentially the same. Where an LLC can help you is to shield yourself from liability exposure. I don't know the business you're in but that is definitely up to you to assess. |
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06-18-2019, 06:36 AM | #18 | |
Buddy Christ is a Chiefs fan
Join Date: Nov 2008
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Posts: 10,501
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06-18-2019, 07:43 AM | #19 |
Scarlett Johansson's boytoy
Join Date: Nov 2006
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figure out what they want to pay you. With taxes, you should be making at least 2x to 2.5x your previous wage to account for expenses and taxes.
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Posts: 12,526
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06-18-2019, 08:23 AM | #20 |
Politically Incorrect
Join Date: Feb 2009
Location: Scottsdale, AZ
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LLC's are normally formed if the line of work you are going to be doing exposes you to a variety of lawsuits and liabilities such as construction, driving a vehicle, medical or anything else where you are a target for lawsuits so you can protect your assets.
If you are just a CONTRACT worker and doing tech work, game development, book keeping, project management you do NOT need an LLC and an S or C Corp is just fine. What type of work will you be doing? |
Posts: 51,067
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06-18-2019, 08:37 AM | #21 | |
Starter
Join Date: Dec 2009
Location: flyover country
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I agree. I worked self employed for 20 years and never formed an LLC or S/C corp because there was little to no liability. The biggest disadvantage to being self-employed is that you have to pay your share of social security AND the employer's share so you're out of pocket social security tax is double. The other big one is health insurance. Last edited by Icon; 06-18-2019 at 08:38 AM.. Reason: left out a key word. |
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06-18-2019, 01:46 PM | #22 |
Supporter
Join Date: Oct 2002
Location: Scottsdale, AZ
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Can I piggy bank on this thread?
I've never been sued and there are no pending lawsuits now. I recently acquired LLC status for my business. Since I've done this with no actions against my business in the works, does this protect me against work I've done in the past; before attaining an LLC? |
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06-18-2019, 01:50 PM | #23 | |
Scarlett Johansson's boytoy
Join Date: Nov 2006
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I would think not. Your work prior to formation of the LLC is technically by a different entity. |
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Posts: 12,526
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06-18-2019, 01:52 PM | #24 | |
Supporter
Join Date: Apr 2007
Location: Scott City KS
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Nope. LLCs and Corps are legally separate entities. Essentially it is like if someone else is doing the work now. What you did before doesn't matter. At least that's my understanding. |
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06-18-2019, 08:30 PM | #25 | |
MVP
Join Date: Oct 2011
Location: Michigan
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It will be important for the OP to determine how he wants to do things and seek out specific guidance. If you intend to declare as an S-Corp, then it is important that you 1) Pay yourself a salary and 2) that salary be justifiable and reasonable in the eyes of the IRS, else you would be in for a ride. I wasn't overly clear in my original post about too much because I'm not offering this as a service to a client and would rather you seek out your own CPA to help you, but ... If you elect S-Corp status as an LLC you do get some benefits... 1) You are paying yourself a reasonable salary and as such only have to pay OASDI/Medicare on that salary. The salary is a deductible expense of the business and reduces "net income." 2) As such, you won't pay OASDI/Medicare on ALL income as you would in the case of an LLC or any other pass-through classification. 3) As well, since salary is taken from income, you will not pay income taxes on that salary. This reduces your income tax burden. 4) Consult a tax professional on the exact in's and out's of the 20% deduction associated with having a pass-through entity. This is outlined in the Tax Cuts and Jobs Act, Provision 11011 Section 199A. I'm not abreast on it overall but I know there are limitations on income and wages paid. 5) There is different tax paperwork and overall paperwork to file with the IRS if you elect to be treated as a corporation and then an S-Corp. A sit-down with an Accountant to go over everything is paramount for you (not a ****ing Lawyer). |
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06-18-2019, 08:35 PM | #26 |
Has a particular set of skills
Join Date: Dec 2003
Location: On the water
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I’ve been doing contract work in I.T. for 15/22 years. Never did a LLC or S-Corp. W2 only. What liability do you have doing I.T. Work?
They changed the tax laws about home offices so even that’s not worth it. I’m assuming we are not talking I.T. But some work with a possible liability, correct? |
Posts: 79,338
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06-18-2019, 08:38 PM | #27 |
MVP
Join Date: Oct 2011
Location: Michigan
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I forgot to mention, and Buehler hit it hard... So many "Want-To-Be" businessmen struggle at understanding the importance of treating business as a business and separating that business from personal. As an accountant, I'm not going to put your bag of Skittles, can of chew, dinner with your wife, and whatever else in as a business expense. It's going to go in as an Owner's Draw.
Speaking of Owner's Draw... the resultant income of the business from what I said in my above post may be retained in the business or taken as a Distribution. |
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06-18-2019, 08:40 PM | #28 | |
MVP
Join Date: Oct 2011
Location: Michigan
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06-18-2019, 08:42 PM | #29 |
Has a particular set of skills
Join Date: Dec 2003
Location: On the water
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Posts: 79,338
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06-18-2019, 08:44 PM | #30 |
MVP
Join Date: Oct 2011
Location: Michigan
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Sorry Chief... hit post too soon... Your primary liability is going to be errors and ommissions and breach of contract.
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