Setting up consulting business - LLC, PC, or what?

[Anonymous]

My husband and I want to set up our own consulting business for work we'll be doing on the side, apart from regular day jobs. I looked briefly at the LLC option, but it seems like the income taxes are pretty high and it requires a bunch of other stuff we'll never need. (We will never have employees, for example.) Are we better off setting up a PC? I know very little about this kind of thing, so any tips or suggestions about where to start would be very appreciated!

[Anonymous]

Anonymous wrote:My husband and I want to set up our own consulting business for work we'll be doing on the side, apart from regular day jobs. I looked briefly at the LLC option, but it seems like the income taxes are pretty high and it requires a bunch of other stuff we'll never need. (We will never have employees, for example.) Are we better off setting up a PC? I know very little about this kind of thing, so any tips or suggestions about where to start would be very appreciated!

Can't speak to the other issues, but from a tax standpoint I don't think it makes any difference between LLC or PC. You'll be a passthrough entity in either case, paying taxes at your top personal marginal rate. You don't want to be a corporation for a variety of reasons, but one of them is the double taxation component.

Are you and dh going ot be equal partners?

You should consult a lawyer.

[Anonymous]

Talk to your accountant. We have an S-Corp for tax purposes.

[Anonymous]

Yes, talk to your accountant. I have a solo consulting business set up as an S-Corp rather than an LLC.

[Anonymous]

I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

[Anonymous]

Mine is an LLC filing as an S Corp. It is a pass through entity. The S corp means that we can pay ourselves a salary, which has some tax benefits.

[Anonymous]

Anonymous wrote:I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

Unless there is some sort of special circumstance, your entire home is not a business expense. You are required to calculate only the percentage you use for work. And no, you can't count places like the kitchen and bathroom because you use them to make lunch or wash your hands during your work time. There are very specific and limiting guidelines.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

Unless there is some sort of special circumstance, your entire home is not a business expense. You are required to calculate only the percentage you use for work. And no, you can't count places like the kitchen and bathroom because you use them to make lunch or wash your hands during your work time. There are very specific and limiting guidelines.

If your home is a condo then the whole thing counts.

[Anonymous]

P.C. is only used if all members of the board are licensed professionals. Typically used by engineers, architects, lawyers and doctors.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

Unless there is some sort of special circumstance, your entire home is not a business expense. You are required to calculate only the percentage you use for work. And no, you can't count places like the kitchen and bathroom because you use them to make lunch or wash your hands during your work time. There are very specific and limiting guidelines.

If your home is a condo then the whole thing counts.

What if it's a rented apartment?

[Anonymous]

Anonymous wrote:I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

What do you count as business expenses? Mine are much lower even though my income is much higher. I've got computer and phone, accountant and lawyer fees, virtual bookkeeper, business travel, office supplies. What else am I missing?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not sure why you say LLC has high taxes. It doesn't, in fact it saves you a ton of money on taxes. Your places of home is a business expense, everything you buy for the company (computers, etc) is a business expense. Last year our consulting LLC grossed $30,000 and we only paid taxes on $9000.

Unless there is some sort of special circumstance, your entire home is not a business expense. You are required to calculate only the percentage you use for work. And no, you can't count places like the kitchen and bathroom because you use them to make lunch or wash your hands during your work time. There are very specific and limiting guidelines.

If your home is a condo then the whole thing counts.

Sorry, but you can only claim areas that you use exclusively for business, so if you don't have any space that is only for your business and not for living then you don't get a deduction. http://www.irs.gov/pub/irs-pdf/p587.pdf

OP, I think a PC will have a higher tax rate than an LLC, although it may depend on your circumstances. An LLC basically treats you like a corporation for liability purposes (so if the company incurs debts the creditors can't go after your personal assets) but as an individual for tax purposes. I think s-corps are sort of obsolete at this point because they were a way of getting that treatment before LLCs became widespread.