You Are A Business, So Treat Yourself Like One
When you are not an employee of a company and you earn your income as an independent contractor, you have the option of becoming your own company. Right now, you probably receive your money as a sole proprietor, meaning there is no legal distinction between yourself and your business. But you may have heard some of your colleagues talking about becoming an Incorporated business or even an LLC (Limited Liability Company). This simple planning device could be helpful when you are involved in an accident and the injured party decides to sue because of your ‘celebrity’ status.
Filing an S-election or becoming an S-corporation can provide an advantage on self-employment tax. The current tax code is very entrepreneur-friendly and you should take advantage of any obvious ways to save. Record-keeping requirements for LLCs and S-corporations differ — LLCs seem to have more flexibility with less paperwork. And don’t be shy about choosing a cool name for your company. For example, I like ‘ShotDiva LLC’, or ‘I Run Fast Inc.’.
Becoming a business entity requires registering with the secretary of state in whichever state you reside in. Certain forms must be filed and fees paid in order to complete this process. It may seem daunting at first, but before you decide that the upfront effort needed is more trouble than it’s worth, please consider the potential advantages with a financial planner. These options were developed to help people like you and me, and I would be happy to go over them with you.