I started coaching biz & want to start an LLC but if I wait until 2021 I'll save $1600 but don't want to get audited,should I choose LLC or sole proprietorship in 2020?

[rosha-ent]

I want LLC because of the liability separation but if you register in 2021 the $800 tax is waived in CA (Where I live). Can I change Sole prop to LLC and does it cost me anything?

[Anonymous_ · Accepted solution]

Single-member LLCs (without an election to be treated as a corporation for federal income tax purposes) are treated as disregarded entities and report on Schedule C, the same as sole proprietors.

Your risk of getting audited really is no greater either way; you report income and expenses on the same federal income tax form and schedule.