Freelance work, taxes, and LLCs?

billybob535

CJ-6 Junkie
Joined
Feb 27, 2010
Location
Shallotte NC
I just got offered an opportunity to do some freelance work. I would be doing the same thing I do 40 hours a week just for another company. I sometimes do small stuff on the side for cash but this would be a regular thing that would have to be taxable. Someone I work with suggested setting up an LLC. He said then the place I would do the work for would pay me through my LLC. I don't exactly understand how that all works but is that the best route? If not is there something better? This is for a 5 hour a week at $90 per hour deal if that makes a difference.

Thanks

Bob
 
Someone can correct me if I'm wrong but a LLC is a limited Liability Corp. Used to help limit your liability. If you are worried about getting sued then yes by all means do it. It might help on your tax's but I'm clueless on that. What kinda freelance work?
 
so you would be a contractor for this company rather than an employee?

LLC is cheap and easy to set up, but like with any corporation, you'd have to pay taxes on that $$$. If you pay yourself from the LLC, you'd have personal income taxes. I think technically the LLC would have to issue you a 1099 or W-2...


I'd just set up a sole proprietorship and be done with it. Well, it kind of depends on what you'll be doing. If its risky and you may get sued, set up some sort of corporation to insulate yourself personally. If you are doing nothing more than taking some photos during the week, I'd think a sole proprietorship would work just fine
 
I don't think there is a tremendous amount of liability in what I would be doing but I sure would hate to lose my house if it went tits up. I mostly want to make sure I pay the least amount in taxes and put as much in the Jeep fund as possible. I am told I will lose about 48% of what I charge to taxes. That sound right for freelance work?

Bob
 
Spending the money on an LLC is up to you. It basically just insulates your personal property from the business. Costs $200/yr for the NC Secretary of State annual report fee.

If you're the only one on the LLC, taxes pass straight through, same as a sole proprietor.

But you can also just get a tax ID and submit self-employed income tax on a quarterly basis. Making $450/wk, you're going to want to submit on a regular basis. FICA is the biggest hit, b/c you'll pay twice as much as you normally would (employer pays half, but you're self-employed, so you pay the whole thing).
 
Shawn said:
If you're the only one on the LLC, taxes pass straight through, same as a sole proprietor.
Click to expand...


This is the biggest benefit to the LLC. You lose the "double taxation" of a regular C-corp. In a C-corp, the money the company makes is taxed, and then the money the compnay pays you is taxed (same money taxed twice). In an LLC, the company is not taxed on the money it makes, rather you are taxed on the LLC distribution to you (your salary). The second best benefit of an LLC is you do not have any personal liability should something go bad in the business (i.e. you would never loose your house).

I tell everyone to form their business as a LLC, never as a sole proprietor.
 
I never did setup a LLC but I always got either a 1099 or reported extra income on my income taxes. They'll take you to the cleaners then, but otherwise it should be fine.

Just make sure you keep track of ALL your expenses. If you drive, get a log book. Not only does it help you keep track of your mileage, but it also covers your ass if they audit you.

If you have expenses, make expense sheets, file originals and make scans. Once again, ass-covering but also helps you when it comes to tax time.

In your contract, make sure it is laid out in plain when you will get paid. Otherwise they can, AND WILL drag it out. Remember, freelancers are the lowest on the totem pole so watching out for yourself is THE most important part.
 
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