Tax question

[PrideTrombone]

OK, so I have a side business of sorts, writing marching band shows for various high schools. I'm getting hit kind of hard on my taxes this year due to the extra income, so I've considered forming an LLC in which I am the sole owner and employee. I would then fill out IRS form 8832 to elect to have my LLC taxed as a corporation instead as an LLC to take advantage of the lower tax rate. I don't see this side business ever making more than $30,000 a year or so, but it's looking like I'll make around $18,000 extra this year so I'm trying to be proactive regarding the tax situation.

Is there any reason I'm missing why this wouldn't be a good idea?

Thanks for any help any of you might be able to provide.

[Tulsa_Fireman]

I'm going off of memory from 15 years ago, but back when I was self-employed some guys I knew formed LLCs to be able to do a few things that simply filing as self-employed wouldn't let them do.

The obvious one is the tax rate. Filing a Schedule C requires you to absolutely slaughter yourself with income, FICA, and Medicare taxes. This reason alone is incentive enough. However, if memory serves, if you establish an LLC you can be a sole owner of the LLC yet also be an employee, reducing the tax liability on both ends. There's angles to claim 401k contributions, employee pensions (YOU!), health insurance premiums, as well as your expenses as a business. Tons of deductions you won't enjoy filing Schedule C.

I don't remember all the tricks and tips. An accountant and lawyer would be your best friends forming one, especially if you're expecting this to last for a number of years. But yes, you could very well save a ton in taxes if you set it up correctly.

[SoonerJack]

do the LLC

[dwarthog]

My .02 cents.

Seek real professional help on this one.

Internet help, well you are going to get what you pay for, all good intentions aside.

[Sooner5030]

Most folks change from sole proprietorship to LLP, LLC or Inc to limit personal liability not to lower taxes. Do your research.....in some cases the business pays taxes on net income and dividend distro.

[rekamrettuB]

OK, so I have a side business of sorts, writing marching band shows for various high schools. I'm getting hit kind of hard on my taxes this year due to the extra income, so I've considered forming an LLC in which I am the sole owner and employee. I would then fill out IRS form 8832 to elect to have my LLC taxed as a corporation instead as an LLC to take advantage of the lower tax rate. I don't see this side business ever making more than $30,000 a year or so, but it's looking like I'll make around $18,000 extra this year so I'm trying to be proactive regarding the tax situation.

Is there any reason I'm missing why this wouldn't be a good idea?

Thanks for any help any of you might be able to provide.

Very good idea if you had a substantial amount of income in my opinion. Maybe yours differs but if you made $30K max with no deductions you would pay roughly $4,500 extra in SE taxes. If you paid yourself say half of that you would be saving $2,250.00 In my opinion, the upkeep of doing payroll reports, etc wouldn't be worth the $2,250.00


If you would like more info give me a PM.

[Veritas]

My .02 cents.

Seek real professional help on this one.

Internet help, well you are going to get what you pay for, all good intentions aside.
^^^ This.

DO NOT CUT CORNERS with accounting and legal. Those peeps are costly (our accountant is $150/hour, our attorney $250/hour) but those are the best checks I write given the expertise of both parties. The I is high but the R is as well.

[Breadburner]

Go Inc.....

[rekamrettuB]

^^^ This.

DO NOT CUT CORNERS with accounting and legal. Those peeps are costly (our accountant is $150/hour, our attorney $250/hour) but those are the best checks I write given the expertise of both parties. The I is high but the R is as well.

Agree but when you are only making 15 - 30K and you rack up 10 hours at $150/hour that's 5-10% of your gross income.

[PrideTrombone]

Agree but when you are only making 15 - 30K and you rack up 10 hours at $150/hour that's 5-10% of your gross income.

Well, the 15-30 is on top of my normal income, but I do appreciate everyone's help!

[OutlandTrophy]

The LLC gives you legal protection, not a tax shelter.

consult a tax attorney if you're wanting to stick it to the man.

[Partial Qualifier]

Go with a fictitious name; get some fake business cards.

Begin accepting "cash payment only" from all future clients.

Keep the money in a safe. Spend liberally on hookers & booze. Hang out with Snakebro.

[oumartin]

Go with a fictitious name; get some fake business cards.

Begin accepting "cash payment only" from all future clients.

Keep the money in a safe. Spend liberally on hookers & booze. Hang out with Snakebro.

This!

[rekamrettuB]

Well, the 15-30 is on top of my normal income, but I do appreciate everyone's help!

Right but that's the income at question here that you would need the professional help suggested. Again, if you want a little free assistance I would be happy to help. I have 10+ years of CPA work under my belt.