A highlight from How to Future-Proof Your Retirement Plan!

The Money Guy Show


The money guy. This next question's from brad brian. He says i'm a ten ninety nine contractor. But my boss okay. We'll talk about that in a second. I'm contractor but my boss has suggested me become an llc for tax purposes making about forty five thousand this year. is there a certain income level. That i should consider transitioning to an llc. I think this is really as question how you know. What wind is corporate structure matter. And why does it matter. And how do i know that i've actually hit that point of not hit that point just yet. There's all kinds of things going on there with your question. Brad first of all when your ten nine nine contractor. You don't have bosses. You are the more an independent contractor. See you're your own boss. i would. That's the first question. Because this is something back when i used to work in public accounting and we talked about trucking over the road truckers is that you have a lot of businesses that are set up to where they actually have employees. But they don't wanna pay the payroll taxes so they set everybody up as independent contractors and the way. The irs always comes in and goes. Do you control this person's schedule. Are you their boss. And because if you are they ought to be w. two boys in the reason you won't to be of w. two versus an independent contractor. Is that that that seven point six five percent that goes towards fico social security and medicare taxes half will be paid by the employer and then the other half will be paid by you the employees versus when you're ten nine you pay all fifteen point three percent plus the income taxes. It's just something to be aware of. So that's that's a nerdy answer to now get to the what he's really asking. I would think forty five thousand. Because why do you wanna be. What's different between a soap. Proprietor because that's what you are when you just pay ten nine ninety. Do no planning you just follow schedule c. On your personal tax return you're considered on the eyes of the government a sole proprietor. Who's just doing that schedule. See the first step on the train of business. Structures is probably is a single member. llc and the reason. I say it's the first stop is because you still follow the exact same tax paperwork with a single member. Lc it's a schedule c. On your personal taxes. You're considered what's called a disregarded entity. That's a fancy term for saying that the irs even though you're structured that way you get legal protection you're really not recognized from where you need to file a separate tax return.

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