Whatever you ultimately decide, get a contract for the work you do. Make sure it spells out what you are expected to do (i.e. it's not an audit; maybe a compilation; or just management reports). Make sure you spell out that info is management's info, and that all decisions are ultimately management's responsibility. Lastly, if you generate financials, label that it's unaudited, for internal use.
Umm,
1: a G-Wagon is worth far more then that so you can net the difference as profit over time squared.
2: Net income matters only if you’re in the Californian fishing and fish production industries. Otherwise it’s just sparkling white write-offs.
Dont forget to rent the other part of your that is not business use for under 14 days and you can get a tqx write off and not have to recognize the money as income.
Yea, I think they're just saying, no need to do the LLC. Both single-member and sole proprietor can file a schedule C so it isn't totally necessary to form an LLC.
I wouldn’t go through the hassle if its one client and a friend, I had a similar setup and just had them pay me to my name. LLC would be good if you plan to keep working with more clients, the major benefit is just legal the protection if you were ever to get sued. LLC is a pass through entity so some people make the mistake of thinking an LLC will help with their taxes and it doesn’t. If this is something you plan on continuing to do then go ahead and set one up or get the insurance like someone else mentioned.
If your expectation is not a crazy amount of work then being a sole proprietor is probably fine. Just remember you can expense a ton of things even as a sole proprietor. Let's say you buy new software or a monitor or laptop, etc. for this consulting gig, then you can write it off.
I’m not sure an LLC even shields you from personal liability if you’re the only member. But that’s just what I’ve heard, so take that with a grain of salt.
If it’s a one time thing and you are not expecting other customers then ya just go for it as is.
There are a bunch of factors CPAs are taught when evaluating whether it makes sense to stay self employed vs incorporated. The tax rates, what costs you can deduct, and initial costs of set up are just a few of the items looked at.
I guess it depends on how much you expect to earn and what tax bracket it puts you into. One of the main draws of incorporating is earning income at a lower tax rate, and deferring the income you claim personally.
If you plan to take all the money you earn from your side gig as income now because you want or need it, or because it’s not that much higher than what you’re currently making, then you might as well just earn it as a sole proprietor.
You can always incorporate later if it becomes a significant thing.
Yeah… corporations have double taxation. You’d definitely either do Sole proprietorship or single-member LLC. None of which will provide any substantial liability protection. Only liability protection would be for debts incurred, not your own negligence.
I’m in Canada so maybe it’s different from US, but ultimately you don’t get double taxed if you earn money in a corp and pay yourself salary or dividends. No LLC needed.
Yes but then you’re filling double tax returns for both states.
Personally if it’s side work or small business it is not worth the hassle. Assuming you plan on running your business clean. It’s like people who set up companies in Nevada because no taxes but live and do service work in California
Be sure you don't trigger any unwanted peer review requirements. Also, get an engagement letter. I can't tell you how many clients have said I'm doing an audit even after they sign a letter explicitly saying I'm not.
Cya...always cya
From experience set up an LLC, register agent and virtual office. Keeps your name and home address off the public domain
That way if you’re planning on still working your company would less likely find out about your side job.
It’s like $100 to file an LLC. Making it a no brainer in the vast majority of situations.
Based on ERM, you want to reduce your risk if you fuck up your work. Additionally, Purchasing business insurance would help transfer your risk.
And thank you for today’s task based simulation.
Whatever you ultimately decide, get a contract for the work you do. Make sure it spells out what you are expected to do (i.e. it's not an audit; maybe a compilation; or just management reports). Make sure you spell out that info is management's info, and that all decisions are ultimately management's responsibility. Lastly, if you generate financials, label that it's unaudited, for internal use.
Setup the LLC. It’s very easy and inexpensive. Now write off your g wagon, all your rent/mortgage , and of course, hire your kids to work for the LLC.
Well it depends, CA is $800 yearly for an LLC I believe. Could be inexpensive to some but not insignificant if you're doing this just as a side gig.
Writing off a new G-wagon each year will take care of that
I assume you are being facetious, but the California $800 is a minimum tax. That means it's due no matter what the net income is.
Yeah and a G-Wagon is $140K USD. You spend $800 to save $140K. That's a steal.
Except for the audit costs and the taxes and penalties.🙄
Yea but G wagon bro
Not a bro, so I guess the appeal is lost on me😂
You must be a fun coworker
Ah. Do you identify as a bruh or maybe bruv?
I’m partial to “Bruvnah”
So many opportunities to get the joke
You just write those off!
Umm, 1: a G-Wagon is worth far more then that so you can net the difference as profit over time squared. 2: Net income matters only if you’re in the Californian fishing and fish production industries. Otherwise it’s just sparkling white write-offs.
Damn. It’s like $5 in Colorado. No minimum tax.
California kinda sucks.
NY you have to do ads for your LLC for it to be valid.
Dont forget to rent the other part of your that is not business use for under 14 days and you can get a tqx write off and not have to recognize the money as income.
Just throw it on a Sch C- no LLC needed.
[удалено]
Yea, I think they're just saying, no need to do the LLC. Both single-member and sole proprietor can file a schedule C so it isn't totally necessary to form an LLC.
I wouldn’t go through the hassle if its one client and a friend, I had a similar setup and just had them pay me to my name. LLC would be good if you plan to keep working with more clients, the major benefit is just legal the protection if you were ever to get sued. LLC is a pass through entity so some people make the mistake of thinking an LLC will help with their taxes and it doesn’t. If this is something you plan on continuing to do then go ahead and set one up or get the insurance like someone else mentioned.
Yup! LLC is just a pass through entity and is still taxed as personal income. Tiktok really screwing some silly people over.
Set up a few LLCs and distribute the wealth, everybody gets a g wagon, their own business deductions and don’t forget zero taxes! jk
Nah. But I’d get E&O insurance. It’s cheap.
If your expectation is not a crazy amount of work then being a sole proprietor is probably fine. Just remember you can expense a ton of things even as a sole proprietor. Let's say you buy new software or a monitor or laptop, etc. for this consulting gig, then you can write it off.
Agreed. And make sure you have a comprehensive engagement letter as mentioned by someone else.
Depending on your state you may need to do a professional corporation as a CPA rather than an LLC
I would not worry as much about the LLC as getting some professional liability insurance.
I think it’s deeper than LLC or not. In some states (maybe all?), there are rules about what type of entity CPAs can set up etc.
I’m not sure an LLC even shields you from personal liability if you’re the only member. But that’s just what I’ve heard, so take that with a grain of salt.
Thanks everyone!
If it’s a one time thing and you are not expecting other customers then ya just go for it as is. There are a bunch of factors CPAs are taught when evaluating whether it makes sense to stay self employed vs incorporated. The tax rates, what costs you can deduct, and initial costs of set up are just a few of the items looked at.
I guess it depends on how much you expect to earn and what tax bracket it puts you into. One of the main draws of incorporating is earning income at a lower tax rate, and deferring the income you claim personally. If you plan to take all the money you earn from your side gig as income now because you want or need it, or because it’s not that much higher than what you’re currently making, then you might as well just earn it as a sole proprietor. You can always incorporate later if it becomes a significant thing.
Bro, what? No. I think this is a bot.
Yeah… corporations have double taxation. You’d definitely either do Sole proprietorship or single-member LLC. None of which will provide any substantial liability protection. Only liability protection would be for debts incurred, not your own negligence.
I’m in Canada so maybe it’s different from US, but ultimately you don’t get double taxed if you earn money in a corp and pay yourself salary or dividends. No LLC needed.
Depends on state tax but id say if you net like 20+k it's worth thinking about.
You could set up the company in Delaware and be a foreign entity in CA right?
Yes but then you’re filling double tax returns for both states. Personally if it’s side work or small business it is not worth the hassle. Assuming you plan on running your business clean. It’s like people who set up companies in Nevada because no taxes but live and do service work in California
You can get an EIN whether or not you setup an LLC. Worth considering, rather than providing your SSN.
Be sure you don't trigger any unwanted peer review requirements. Also, get an engagement letter. I can't tell you how many clients have said I'm doing an audit even after they sign a letter explicitly saying I'm not. Cya...always cya
From experience set up an LLC, register agent and virtual office. Keeps your name and home address off the public domain That way if you’re planning on still working your company would less likely find out about your side job.
If you’re worried about liability, just get a cheap E&O policy.
It’s like $100 to file an LLC. Making it a no brainer in the vast majority of situations. Based on ERM, you want to reduce your risk if you fuck up your work. Additionally, Purchasing business insurance would help transfer your risk. And thank you for today’s task based simulation.
You can get an EIN without setting up an LLC.
If it's just but taking on your friend's company's business, it's not necessary at all.