Sole proprietor has the most unsecure status. In case if someone will sue you, they can have an access to your personal assets. LLC and Corporations are separate entities from your personal assets.
From tax prospective:
- Sole proprietors and LLCs with one owner files their taxes for business on individual tax return 1040 form Schedule C.
- Multi-members LLCs could be treated as Partnership or S-Corporation. Separate entity tax return 1065 for Partnerships or 1120S for S-corporations. After you have to do your individual tax return too.
Sole proprietors and partners in Partnership have to pay Self-employment and Income tax.
S-Corp shareholders doesn't pay Self-employment tax on pass-through income, they pay only income tax. But you have to receive Reasonable Compensation from your S-Corp (W2 for the officer-owner).
Self-employment income from Schedule C and Partnership tax return counted for SS benefits calculations. Distributions from S-Corp are not counted towards your SS benefits calculations.
You can choose whatever is better for you based on this considerations.
Please see the link for CA LLC organization.
https://www.sos.ca.gov/business-programs/cannabizfile/cannabis-forms-and-fees/limited-liability-comp...
Thank you for participating in this event!
Olga S.
