Forums: Discussions for entrepreneurs and small business.

I`m a single member LLC who does a lot of production-type work. I was recently hired by a client for x hours of time-based consultant work (I also do production work for them as well).

Is there any tax advantages/disadvantages to billing for the consultant work as an individual as opposed to billing it through my business? Both sources of income are being tracked through my business, so I`m thinking that it all comes out in the wash at the end of the year, correct? The only difference is that I`ll get two 1099-Income forms from this client instead of one. Am I right?

Thanks

First, there`s really no difference between a single member LLC and an individual.  The LLC is what the IRS calls a "disregarded entity" for tax purposes, and reports its business income and expenses on a Schedule C just like a sole proprietor does.

So one or two 1099s won`t change the tax effect.

The question I have is whether you actually are an independent contractor.  It`s hard to tell without knowing some more details, but if your situation is mis-classified, that could cause some problems.

I always thought that the purpose of an LLC was to protect the partners in a professional relationship from each other.  A law firm, an accounting firm, etc, could be an LLC so that the actions of one member can`t expose the other members to personal liability that an ordinary partnership would.

So, a single person LLC is an oxymoron?  No different than a sole-proprietorship?

Am I wrong?




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Steve Mann
Internet Videographer
MannMade Digital Video
My Email

Steve:

It`s my understanding that, considered as taxable entities, there is no difference between single-member LLCs and sole proprietorships.

But, in other legal matters, there is a difference. Structuring your business as an LLC provides personal liability protection from business debt that a sole proprietorship cannot.

The usual caveats apply (I`m not an attorney, there are exceptions, etc.).




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