Small business for Tax Benefits
Does anyone have an LLC or some corp? Filing a standard W2 is pretty straight forward, but having an LLC or similar opens up a lot of options for expenses filings and ways of calculating tax. I hear about wealthy people using business to recalculate the tax and lessen it, although they probably are able to channel their gains directly through the business. If I channeled my w2 Income through LLC id just be paying taxes twice? Anyone have any experience or opinions on the benefits of a business when you only have w2 income?
I have a single person LLC and in most cases it just ends up being pass through income. Unless you're doing consulting (1099, not w2), there's little point. Infact it's likely to make your tax situation worse.
Just curious, what's the benefit of an LLC for consulting? I consulted some in grad school and had to get a TIN but may not have made enough to justify the filing fee in California.
It's not much to be honest. You are able to deduct some expenses, but it's not going to net you much of a deduction in most cases if you are small time. I did it because it seemed like the "professional thing to do", but in the end it ended up hurting me a bit. For example, consulting through an LLC means in the case of any legal action, you will need a lawyer to represent you. If you are just getting started, this can be a bit of a pain the ass, as some things can be settled through small claims, or via simple motions to dismiss. Clients/companies that already have lawyers on retainer can "bully sue" you, knowing that you will have to hire a lawyer yourself. My experience: Tried to consult before with a client not experienced with software development. Client switch requirements midway through, I asked for more money. Client decided to sue me some something bogus after I sent a letter asking for payment. Ended up having to hire a lawyer and had done 80+ hours of unpaid work.
I don't think having your own Corporation make sense for a normal W2 worker. It only makes sense if you are paying your own expenses, Insurance, Etc. That said, if you want to consider it, talk to an accountant with relevant experience. A good accountant will save you more money than they cost!
I drove for Uber and claim loss.
That’s a good idea to mark down some income. What was the income you listed? Assuming you didn’t drive a lot.