A couple months ago I formed a LLC for what is basically just a consulting/training company. I’ve only done 1 consult so far this year but I have another one lined up in December.
To give you an idea of the $ value: The consults are typically 1-2 days (6-18 hours) and I charge about $100 an hour. I made $1200 off my first gig. Moving forward I expect to do only 3-4 of these consults a year. Which I think is a decent little side hustle for me… I’m just trying to figure out what the smartest thing to do would be for taxes. My understanding is that I’ll have to pay self-employment taxes? I really don’t have many business expenses/deductions, just some legal fees for setting up my LLC, and maybe mileage but most of the companies I’m working with are local to me.
I have a full-time job (as a teacher) and I normally file jointly with my spouse through TurboTax. I live in Pennsylvania if that helps with anything.
A single member LLC, with you as the sole member, counts as a disregarded entity and you report on a Schedule C. LLC is a state thing, not an IRS thing. This is not a pass-through entity like a partnership or S-Corp. Do not make the S-Corp election without talking to an EA or CPA first. Lots of hassle and fees.
Not sure of the Pennsylvania filing requirements but CA has an $800.00 LLC fee and an additional form and other annual requirements.
@West
This: ‘or you and your wife only count as a disregarded entity and you report on a Schedule C.’ is not correct. A husband/wife LLC can’t elect to be treated as a Qualified Joint Venture (QJV) unless they live in a community property state. The default would be a partnership.
Bailey said: @West
Not true if a husband and wife both operate an LLC—a partnership return is required.
Unless it qualifies as a QJV.
Which can only be the case if they live in a community property state. If not in a community property state, a husband/wife LLC can’t elect to be treated as a QJV.
@West
The LLC is just me. As far as I know there is no annual LLC fee in PA. I’ll look into it, but I feel like the lawyer that helped me file the LLC would’ve told me about that.
Vic said: @West
The LLC is just me. As far as I know there is no annual LLC fee in PA. I’ll look into it, but I feel like the lawyer that helped me file the LLC would’ve told me about that.
Lawyers are not tax pros, and tax pros are not lawyers. We tend to stay in our own lane. If you are unsure about the taxes, hire an EA or CPA.
@West
Sorry for the double reply, but I should also add that ‘my lawyer would tell me if there’s a drawback to what I’m doing’ is a mistake. If you hire a lawyer to do task A, you’re not hiring them to, unprompted, write you a treatise on every possible legal consequence of doing said thing.
Vic said: @Jai
I should add that the lawyer is a family friend, but I see what you’re saying.
It’s not even a ‘that’s not what you’re paying for’ thing. It’s more that it’s just not possible to anticipate all the things your client needs to be told. I’ve set up an entity and later gotten ‘you didn’t tell us we’d need to file tax returns!’
Jai said: @West
As a tax lawyer, I don’t agree that lawyers are not tax pros categorically. But your corporate attorney who forms your LLC probably is not.
Totally agree, blanket statement. I am amazed when returning clients come in with a new corp/partnership without talking to me or an attorney. ‘What is a partnership agreement?’ /s
Vic said: @West
The LLC is just me. As far as I know there is no annual LLC fee in PA. I’ll look into it, but I feel like the lawyer that helped me file the LLC would’ve told me about that.
Am a tax pro in PA. No LLC fee. You do have mercantile tax and a BOI to file. Feel free to ask me any questions.
@West
Pass-through or flow-through is more commonly used to refer to partnerships and S Corps, but I agree that technically a DRE is a form of pass-through taxation too. I avoid using the term to describe a DRE though for the sake of preventing any misunderstanding.