Why do so many people call a LLC a sole proprietor?

If you’re a small operation, there isn’t much legal shelters in a LLC or corporation. Only way you can claim personal legal protection is if the corporation acted without your knowledge. Being a small, or even medium size operation, it’s very hard to claim that the corporation or LLC acted without your knowledge or consent.

There are tax advantages and disadvantages on whatever you choose. You need to talk to an accountant.

 

Could mean $3-5000 or more a year in the bank that would have normally been paid out in taxes.

You’re savings will vary. Because the money we earn varies. Do you take the money as payroll, or do you take it as a dividend?

An ACCOUNTANT/CPA is the best person to have this conversation with. I drive a truck for a living, my account keeps up with tax laws etc.

Here’s the easy answer. Pay your accountant or CPA for an hour of sit down time. You’ll come out further ahead than if you ask a truck driver a thousand questions about it. And probably avoid an audit and/or fines

 

The purpose of LLC or Corporation for a small guy is to be able to form S-Corporation and as mentioned in the post above, to be able to choose what portion of your income is a payroll (higher tax) and dividend (lower tax). The salary has to be reasonable to a given industry standards. Practically, it means the proportions should be not less than 40/60, better yet 50/50 or 60/40 to let IRS bother more daring. For example, if you cleared 100K then 20K in salary is not going to cut it. The more business income the better the savings.