PAYSTUBMAKR.COM present the 2nd part on (LLC) is it an option for gig worker
LLC is your second option for creating a legal entity for your gig work. LLC require filing some formal but simple and easy to file documentation. You can use some help by online companies that are dedicated to helping people to create LLCs including filing the papers for you. LLC forming and running is more complicated than the Sole proprietor.
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What Are the pros of an LLC?
There are several pros for being an LLC on being a Sole Proprietor:
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Your liability for the debts of the company is limited. It is not that important as a gig worker unless you will grow into a real business with employees of your self and get the bank to land you some money that you may lose.
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LLC can be more attractive to the bank or another lender; it looks like it has a more serious concept and may be taken as a vision for growth.
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You could transfer shares in some moment in the future as pay for the investment.
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Taxes are simple, although it can be more complicated. The new tax law gives you a bigger advantage with taxes. Read here
Image 2, Home office for gig worker
What Are the Disadvantages of an LLC?
An LLC does have a few disadvantages:
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The paperwork called “Articles of Organization” is the documentation you need to form an LLC
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There are an annual report and a fee to the State you registered the company.
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LLC have to have a separate bank account from your bank account and its assets different from your ones. All this requires effort in accounting and paperwork.
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The cost of accountant service will be higher.
Image 3. Working place at home
Taxation for the LLC
LLC taxation is little more complicated
As an owner and an employee of the LLC business, you will have more complicated taxation than with a Sole proprietor business structure. The profit as owner and the profits from your be considered as a “Flow through” meaning that you will pay taxes on salary and revenue from the business together on your tax return. For your employment, you will have to make your paystubs.
The new tax bill starting in 2018 gives the LLC company a 20% of its revenue tax-free. That means that if your business balance between expenses and income is $50,000 you will have to pay taxes only on the $40,000. It ends in saving you $2.200 tax that you would not pay on the 20% or $10,000 tax-free. A good reason for the change to an LLC. Go to your accountant to review this option before you take a step towards changing form Sole proprietor. Also read: The preferred Business structure under the 2017 Tax Reform
Tax brackets for 2018
|
Rate |
Individuals |
Married Filing Jointly |
|
12% |
$9,526 to $38,700 |
$19,051 to $77,400 |
|
22% |
38,701 to $82,500 |
$77,401 to $165,000 |
|
24% |
$82,501 to $157,500 |
$165,001 to $315,000 |
|
32% |
$157,501 to $200,000 |
$315,001 to $400,000 |
Image 4. A nice space for the gig working
The costs of forming an LLC
Here are the costs for forming and running an LLC :
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A business bank account will be charged by the bank by a certain amount of fee.
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Your Accountant fees for consulting and filing the business and personal tax returns.
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Forming a business —it Depending on the state it can be $80 to $250, paid only once.
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Annual report filing — between $20 and $250.
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A lawyer or a company that gives the service of forming legal entities
The limited liability and the 20% tax-free are an excellent reason to spend the extra money and change or start your business as an LLC.
If you make only $30,000 a year as a gig worker, you better stay as a Sole Proprietor. The cost of using an LLC will not be higher than the saving of taxes. Tax bracket on $30,000 is only 12% or $3,600. That 20 percent tax break for small businesses is no free-for-all. How to navigate
Building a business or just making some extra money are two different things If you belong to the business builders and have a long shot like a target you may start as LLC. If you are one person band and think of the moment, like looking for extra $1,000 a month to pay the bills take things easy and clear, your taxes will be small money for the cost of maintaining an LLC.
If you will be that lucky with your small individual gig job and your talent will become a super good, let us say you started a blog or a YouTube Channel that became viral with millions of subscribers it will be easy to convert your Sole proprietor into an LLC. As those things are not predictable, it is better to keep your dollars in your pocket and wait for the success to knock on your door before spending your hard worked dollars.
Mastering The Gig Economy: A New Way To Land Fortune 500 Jobs
Be aware of going too far with making things simple by not forming any structure, not paying taxes and spending the money on nonproductive things. You can find yourself in a big problem with the IRS for evading taxes, paying penalties or even worst not being capable of paying your taxes because you spent the tax and penalties money on your Smartphone and K4 TV.