Business & Investing
Sponsored by

LLC or Sole Proprietership?

1,575 Views | 14 Replies | Last: 6 yr ago by Cancelled
IrishTxAggie
How long do you want to ignore this user?
AG
Looks like I'll be forming one of the two for a new position I'll be taking. I'll be working on contract basis and responsible for all of my own withholdings, benefits, etc.. This is new territory to me being that I've always been on a payroll, so any help is appreciated. I will also likely be looking for a CPA in the Houston area in the coming months too.

Can I leave money in the LLC tax deferred to invest? Sort of using the LLC as a 401K account. If so, how much and for how long? Would I be restricted as to where I could invest the money?

My plan would be to pay myself an hourly rate from my LLC based upon how much I'll "need" at any given time (ex: $50/hr at 40hrs/wk). I will be the only employee under the LLC.

Also, any insight into things I'm likely overlooking as to which one would be better for my circumstances would be appreciated. Thanks
ORAggieFan
How long do you want to ignore this user?
S Corp is probably the way to go. Just did one myself.
diehard03
How long do you want to ignore this user?
I think the type of work you are doing and what liability protection you will need (vs just insurance) will go a long way in determining your solution.
lockett93
How long do you want to ignore this user?
AG
All profits /income from a sole proprietor (no legal entity) or an LLC (default tax treatment is sole proprietor if single member) are passed through to the owner. So, no, you can't leave the profits in like a 401k. You can leave the money in, but you will pay tax on the profits regardless.

You can elect to tax your LLC as an S Corp. This is useful when you have employees or if no employees you can reasonably divide the profits into the component that you earned personally and the portion that is because you own the company. You will need to pay yourself a w2 wage for the work you do for the company. The rest of the profit flows through as ordinary income and is not subject to SS/Med tax
Marvin_Zindler
How long do you want to ignore this user?
AG
Never ever ever ever ever operate a business as a sole proprietor. Legal structures are there fore your benefit. Use. them.
The Wonderer
How long do you want to ignore this user?
AG
hodgesco said:

Never ever ever ever ever operate a business as a sole proprietor. Legal structures are there fore your benefit. Use. them.
This isn't always true. Most of the time, but not always.
Sooner Born
How long do you want to ignore this user?
ORAggieFan said:

S Corp is probably the way to go. Just did one myself.

Wise.
Sooner Born
How long do you want to ignore this user?
The Wonderer said:

hodgesco said:

Never ever ever ever ever operate a business as a sole proprietor. Legal structures are there fore your benefit. Use. them.
This isn't always true. Most of the time, but not always.

In some cases a good insurance policy is going to be better than any legal structure.
Cancelled
How long do you want to ignore this user?
AG
ORAggieFan said:

S Corp is probably the way to go. Just did one myself.


Why? One can form an LLC with the state and elect s-corp status with the Feds to lawfully mitigate self employment tax. S-corp for state purposes is antiquated and a poor structure (imho) for a single owner operator.

*This is not legal advice. Contact a competent attorney for legal advice.
Sooner Born
How long do you want to ignore this user?
Truth be told, I've formed an LLC (s-corp election for tax purposes) to protect separate my family's immense wealth from my texags posting habits. I pay the LLC to pay me to post on behalf of the LLC. This means that any legal action as a response to the inflammatory comments I make is directed to my shell company, with $5 of equity, rather than to the many hundreds I've amassed in net worth.
libertyag
How long do you want to ignore this user?
AG
queso1 said:

ORAggieFan said:

S Corp is probably the way to go. Just did one myself.


S-corp for state purposes is antiquated and a poor structure (imho) for a single owner operator.


Based on what?
The Wonderer
How long do you want to ignore this user?
AG
queso1 said:

ORAggieFan said:

S Corp is probably the way to go. Just did one myself.


Why? One can form an LLC with the state and elect s-corp status with the Feds to lawfully mitigate self employment tax. S-corp for state purposes is antiquated and a poor structure (imho) for a single owner operator.

*This is not legal advice. Contact a competent attorney for legal advice.
S-Corp for state purposes? What do you mean by this? S-Corp is not a legal structure, just a taxation election that can be chosen by an LLC or corporation.
Cancelled
How long do you want to ignore this user?
AG
Liberty and the wonderer:

You are correct that s-corp is not a state filing, but from what the poster said, I didn't want to get too off in the weeds. I understood that the poster formed a corp for state purposes and then elected s status with the Feds. I'm saying I don't usually form corp status with the state, but rather llc.

The reason I choose LLC is because you can elect a member managed LLC and dispense with the corporate formalities of officers, board of directors and shareholders and run it simply as members. This means it can be run in a much more fluid and simple way.

My business structures prof in law school said "why drive a model t (s-corp) when you can drive a Lamborghini (LLC) for cheaper?"

This allows one to get the best of both worlds.
The Wonderer
How long do you want to ignore this user?
AG
queso1 said:

Liberty and the wonderer:

You are correct that s-corp is not a state filing, but from what the poster said, I didn't want to get too off in the weeds. I understood that the poster formed a corp for state purposes and then elected s status with the Feds. I'm saying I don't usually form corp status with the state, but rather llc.

The reason I choose LLC is because you can elect a member managed LLC and dispense with the corporate formalities of officers, board of directors and shareholders and run it simply as members. This means it can be run in a much more fluid and simple way.

My business structures prof in law school said "why drive a model t (s-corp) when you can drive a Lamborghini (LLC) for cheaper?"

This allows one to get the best of both worlds.
Wholly agree, just wanted to ensure I was understanding what your were saying.
Cancelled
How long do you want to ignore this user?
Refresh
Page 1 of 1
 
×
subscribe Verify your student status
See Subscription Benefits
Trial only available to users who have never subscribed or participated in a previous trial.