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Are there advantages to going LLC rather than staying 1099? (Tax-wise and overall legal-wise)

Brooksville, FL |

I am thinking of getting a Business name for my 1099 (convert into LLC) because I heard you can get more deductions as an LLC than just 1099. Is this true. I am in Florida.

Attorney Answers 4


  1. Well, the taxes will not be different if you are the sole owner. A single member LLC is disregarded for tax purposes and you will still file the same exact Scedule C. If there is more than one owner, there could be some benefit in the form of saved employment taxes, but I would advise that you see an attorney, especially before entering into any business agreement involving two or more owners.

    An S corp might be more of what you are seeing if you are a one owner business, as this will be respected for tax purposes. You can reduce some liability from having an LLC. A single member LLC will still protect your personal assets for state purposes. But an S Corp will also do this and provide the same pass through treatment. With employment taxes, since they now have the ability to go outside of the entity and assess responsible parties, they provide some, but very little protection from unpaid employment taxes. You aren't going to get to take many deductions that were not going to be allowed as a sole prop, so if that is your purpose, you will find it has very limited effect.

    Christopher Larson
    Insight Law
    www.insightlawfirm.com


  2. I agree with Attorney Larson. The election of business entity type may be a critical decision with long lasting consequences. So, seek an experienced attorney in this area of law to help you reach an informed, competent decision.

    I hope this helps.
    Respectfully,
    Steven A. Leahy
    www.chicagotaxteam.com

    Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.


  3. An LLC is a pass through entity and will not offer you any significant tax advantages. In fact, it will probably cost you more due to the extra tax return preparation costs and potential state fees.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.


  4. The only thing I would add is that some states tax LLCs different than others. For instance, even if your LLC is disregarded for federal tax purposes, the state may impose taxes on the LLC like a gross receipts tax. You should consult with a tax advisor in FL to be sure you know about FL taxes before you do anything.

    This is not specific legal or tax advice. My posting this answer is for general, non-specific information only. My answering this quesiton does not establish an attorney-client relationship,

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