What’s the Best Legal Structure for Your Freelance Business?
This post originally appeared on BusinessNewsDaily on February 2, 2017.
When you’re a freelancer, you’re also running a small business. Being self-employed inevitably makes tax season complicated. That’s why many freelancers have chosen to establish their own businesses legally.
There are three types of business structures most freelancers register under: sole proprietor, LLC and S corp. There are advantages and disadvantages to all, such as better tax breaks or filing a separate tax return. Each situation allows you to deduct for business costs, such as internet or travel.
Why create a legal business?
Although many professionals who freelance on the side simply report their earnings as “miscellaneous income” via the Schedule C (1040) form on their personal tax return, full-time self-employed individuals may find it beneficial to create a legal business entity.
Lauren Saccone, freelance writer and social media consultant, recently established an LLC called Pitchbow at the end of 2016. After freelancing part-time for nearly a decade, she has been a full-time freelancer based in New Jersey for the past two years.
Saccone’s tipping point was filing her taxes for 2015.
“I didn’t know anything about filing as a freelancer,” she said. “I had to figure it all out myself at the last minute, and it was an informative experience, but (it was) stressful.”