Wednesday, July 8, 2009

Should I form an LLC?

Many of you know I will be presenting a seminar, Tax Solutions for Creatives, at the Creative Freelancer Conference in San Diego this August. I wrote a Guest Post: LLC? Incorporate? for the Creative Freelancer Conference Blog. A reader asked the following:

June, what are your thoughts on forming a single-member LLC? (As I understand it, essentially still a sole-proprietorship for tax purposes)

Thank you!

Hello Merry,

I recommend anyone interested in forming an LLC read my posts
business entity -- LLC .

Keep in mind that an LLC is a legal entity, not a tax entity.

A sole proprietor may become an LLC and there will be no change in the tax treatment of his or her business. You form an LLC for legal reasons, for instance, asset protection; or for marketing and PR reasons, for instance, LLC after your name gives you some panache.

If you have similar reasons, then consider forming an LLC.

To maintain the veil of protection of an LLC there are strict recordkeeping rules. However, once again, the rules are for legal purposes not because of tax regulations. In tax jargon, a sole proprietorship established as an LLC is called a "disregarded entity."

-- June

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