I am just starting out and wondering if I should start an LLC or is just keeping going as I am.
Your call. LLC requires annual fee & not sure why you’d want one at all. Might just get a free EIN from IRS. Takes 5 minutes online
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An LLC can provide you will some legal insulation against Law Suits. There are also some Federal Tax benefits to setting up an LLC. This is dependent on the State you reside and where you set up the LLC. There are also tax liabilities that you need to learn about.
I suggest that you do some detailed research on this and speak with a business attorney before proceeding.
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It us a good way to give money to the state. The. LLC does not really protect you. Your E&O insurance is the one who will take the hit take out more insurance. If you really want to talk eagle ease become incorporated that is the only way to keep your personal asserts safe .I speak this from first hand experiance
The protections offered by an LLC is dependent on what State you’re incorporated. There’s also your business processes such as con-mingling finances, keeping separate books and banking accounts (one for you, one for the business), and how you handle taxes. A well written operating agreement will go along way to preventing a lawyer from piercing the corporate veil. Your E&O coverage should be the last link in the chain of protection.
The advantage of an LLC vs a corporation is that the LLC can be many different forms of entity for tax purposes… pass through (limited or general partnership, Sub-S), C-corporation or disregarded entity.
Both corp and LLC are legal ‘persons’ and can provide limited liability if properly maintained.
But whether to incur the expense and effort required to create and maintain a corp or LLC should be based on payback… Most often deductibility of expenses.
TCJA (Trump’s tax law) eliminated certain deductions (i.e.: state & local taxes > $10k, tax prep cost, casualty loss). Certain expenses (e.g.: FASB 13 leases, IRC 105 medical reimbursement plans) are more effectively implemented in a corporation/LLC.
Generally, it is not necessary for most NSA’s to incorporate/form LLC, but it may make sense for some. There are added costs (e.g.: franchise tax, additional tax returns, board meetings, filing fees, etc…).
It might not be a bad idea to engage a credentialed (CPA, EA or attorney) tax professional to look at your situation and determine whether a corp/LLC makes sense. This would usually be a couple of hours advisory outside of completing your return. Bring your tax returns and business books to the meeting.
Anybody giving a ‘one size fits all’ answer is going to be wrong a good percentage of the time.
HWB.