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LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Single member LLC
2 Best answer

Accepted Solutions
tagteam
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?


@Mike9241 wrote:

I would say talk to a lawyer in your state....


No. I would not say to "talk to a lawyer" in this instance. Rather, I would suggest speaking with similarly situated colleagues.

 

Lawyers are almost always going to default to "organize and establish an entity".

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Opus 17
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

@LubaGee94 

If you just want to keep your finances separate, you can obtain a federal tax number  (EIN) to use in your business  without having to form an LLC or any other particular structure.  It’s free online at the IRS website and only takes a few minutes.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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14 Replies
tagteam
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Which state and what are you trying to accomplish?

 

In some states (at least one state, Florida), a single-member LLC does not provide much protection from personal liability while in others the registration and/or (state) annual fees are rather high.

Critter-3
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Ok ... the LLC is only a state designation and has nothing to do with a federal tax return UNLESS you choose to incorporate and before you do that you need to get educated on what your state requires and the fees that may be applied.  If this "business" will not become a full time permanent situation then getting an LLC if one is not required and/or incorporating is like buying a big rig truck when a bicycle will do. 

 

Seek local professional guidance and/or do some eductating on this matter yourself. 

https://www.irsvideos.gov/Business/SBTW

https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc

https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partner...

Mike9241
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

I would say talk to a lawyer in your state.  in some states LLCs don't offer much protection but have high annual fees. so you might be better off with an S-Corp. but then you have to take a salary and have workman's compensation insurance so there are tradeoffs and the S-corp may also have to pay annual fees and in some states is subject to income taxes. 

tagteam
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?


@Mike9241 wrote:

I would say talk to a lawyer in your state....


No. I would not say to "talk to a lawyer" in this instance. Rather, I would suggest speaking with similarly situated colleagues.

 

Lawyers are almost always going to default to "organize and establish an entity".

Opus 17
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

For federal income tax purposes, a single member LLC is a disregarded entity, just like a sole proprietorship, so the income taxes are the same either way.   If you file a special form for the LLC to be treated as an S-corporation, the tax rules are very different.  There are plenty of good books about this.  

 

The function of an LLC is not tax protection, but liability protection, and that varies from state to state. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

State of Florida First to keep the IRS happy and separate any W-2 income from Consulting 1099 work.  launching a website and probably need a LLC for liability coverage for other firms associated with my website.  And separate personal from business.  

LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

All my work is related and not a "hobby" side gig. Used to be simpler. The SS# was the tax ID. With website exposure so comes liability issues. Now its more complex.  thank you for the heads up.

LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

This is most true.  Lawyerly friends are help.  this is not ever going to be a major enterprise, just an organized one.

tagteam
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?


@LubaGee94 wrote:

State of Florida....


A Florida single-member LLC offers little to no personal liability protection.

LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Perhaps the nature of the consulting business is simply caveat emptor.  Based on what I know you know and you decide how you use that information.  free will.

LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Kudos to Turbo Tax people.  I have received the most thoughtful and professional help from the advisors on board during tax time. This clarifies my thinking. 

Opus 17
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

@LubaGee94 

If you just want to keep your finances separate, you can obtain a federal tax number  (EIN) to use in your business  without having to form an LLC or any other particular structure.  It’s free online at the IRS website and only takes a few minutes.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
LubaGee94
Level 2

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

Sound right.  That sounds like the good advice I got 40 years ago.  😊

Opus 17
Level 15

Should an unemployed academic (former w-2) is planning to return to university 1099 AND do side consulting create an LLC?

@LubaGee94 

FYI because I forgot to mention, even if you obtain an EIN for the business, you will still report your business activities on a schedule C attached to your regular personal tax return.

 

Also FYI, if you obtain an EIN as sole proprietor and later decide to change your business to an LLC, you need a new EIN every time you change your business structure.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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