Sole proprietor, LLC, or S-corp. What each actually changes and the income where switching starts to pay off.
Most S corporation calculators ask for your profit and hand back a salary. That is not a thing anyone can compute. The IRS publishes a list of factors and no percentage, so a calculator that returns a number is inventing it. This one works the other way round. You supply a salary you could defend,…
Three things get called “getting a business licence”, and only one of them is a licence. Forming an LLC is not. Registering a trading name is not. The licence itself is a piece of paper from your city, it usually costs less than the LLC people form instead of it, and it is the one…
A lender does not care what you invoiced. It cares what was left after your deductions — the net profit on line 31 of your Schedule C — and it averages that over two years. Which means the year you worked hardest to pay less tax is the year that qualifies you for the smallest…
You elected S corporation status, took money out of the business all year, and never ran a payroll. Nothing has gone wrong yet — nobody has sent you anything. But the return that reports the year is due in March, and what you put on it decides how this ends. Here is what the rule…
Forming your LLC in a state you do not live in is perfectly legal, and thousands of people do it deliberately. It pays in four narrow situations. Outside them it buys a second annual fee and changes nothing you owe. The reason it usually does not pay is that two different things get filed under…
Forming an LLC puts an address into a state database that anyone can search by your name. If you filed from your apartment, that is your apartment, and there is no privacy setting to turn off. Keeping it off costs $99 to $200 a year for a commercial registered agent, or roughly $100 to $600…
Eight clauses decide what happens when a freelance project goes wrong. Scope and deliverables, payment schedule, revisions, kill fee, IP transfer on final payment, confidentiality, termination, and governing state. Everything else is furniture. Write two of them carefully and make it the IP clause and the kill fee, because those are what pay you when…
Forming an LLC takes five steps: check the name, name a registered agent, file the articles of organization, get an EIN, and write an operating agreement. Four of the five cost nothing. The state filing fee is the only real bill, and it runs from $40 in Kentucky to $300 in Texas. Then there is…
An EIN is a nine-digit federal tax ID for a business. It is free, you apply for it at irs.gov, and the online application issues the number on the spot. You do not need employees, an LLC, or any particular income to have one. A sole proprietor can get an EIN for no reason other…
Electing S corporation taxation starts putting money in your pocket somewhere around $85,000 of net profit, and only if a fair salary for your own work sits well below that. Under that line, the payroll service, the extra tax return, and the qualified business income deduction you give up eat the whole saving. It is…