The LLC Advantage

Today TaxMama hears from Roy in Virginia, who wants to know. “Is there any advantage to form an LLC for my speaking and consulting. I am an employed physician and heard there may be a tax advantage of forming an LLC.”

As a physician, you probably carry malpractice insurance – or your employer does – to cover your medical work.

Will that also cover your freelance speaking? Probably not.

The main advantage of an LLC – a Limited Liability Company – is to restrict your financial exposure to the assets of your LLC. LLCs are designed to protect your personal assets from attachment for anything your business may have done.

That’s the general wisdom.

What they don’t tell you is – when the liability, or lawsuit, results from your personal actions or speeches, folks can sue you personally, as well as your company. So, that doesn’t really offer much protection, does it?

Of course, from a business perspective, setting up any entity to separate your business from your personal activities makes a great deal of sense – if this is going to be a full-blown business, not just the odd speech here and there.

If you’re not going to focus on building a business as a paid speaker, perhaps it’s easier to just receive the occasional income personally and report it on a Schedule C.

If you are planning on building a business, sit down with your tax professional and work out the tax advantages of the various entities open to you. Setting up an LLC may be a start. Then, you have to decide whether that LLC should be reported as a Schedule C business, a partnership, a corporation or an S corp.

Consider reading Chapter 3 of Small Business Taxes Made Easy before meeting with your tax pro to learn the pros and cons of each entity for your lifestyle and long-term plans.

And remember, you can find answers to all kinds of questions about LLCs and other tax issues, free. Where? Where else? At TaxMama.com

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