Filing as LLC versus self employed

[user17681516237]

Hello,

I have been running a part-time side business in health and wellness for several years, being paid directly by my clients, students, and by the facilities in which I teach/work (and get paid via 1099 NEC).  So I am familiar with filing as a self employed entity via the Schedule C. 

I am considering taking this business to the next level, and making it an LLC.   I would like more information on the following:

- How this would change how I file my taxes for this business (versus what I have been doing)

- How I would pay myself from the LLC (and make sure that I do it correctly)

- One of my challenges is that I teach at a local gym and a university and they both pay me as a person, and will not pay a "business" so does that mean when I input my details into TurboTax next year I will have to different Schedule C's?  One for myself (self employed, payments direct to me as a person) AND one for my LLC (payments made to the company name, and then I get paid from there)

I want to make sure I am doing this correctly, thank you in advance for any guidance you can provide.

[DawnC]

Taxes for a sole-proprietorship/Schedule C are the same for a single-member LLC.    If you have a partner or make an S-Corp election, you would need to use TurboTax business to file your business taxes on Form 1065 or 1120-S.   Those returns cannot be included with your personal taxes like a Schedule C can.     All of your health and wellness business income gets reported on the same Schedule C no matter what id numbers they put on the forms.    If the income is related to your business and you are a sole proprietor or a single member LLC - it goes on your business Schedule C.     What type of entity is my business?

Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation.    A limited liability company (LLC) is a business structure allowed by state statute. 

• Sole proprietorships
• Partnerships
• Corporations
• S corporations
• Limited liability company (LLC)

[M-MTax]

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@user17681516237 wrote:

One for myself (self employed, payments direct to me as a person) AND one for my LLC (payments made to the company name, and then I get paid from there)

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LLCs default to self-employed status with respect to single-member LLCs and partnership status with respect to multi-member LLCs, Either way you are NOT an employee of the LLC and do not take a salary from the LLC.

[user17681516237]

So if I understand correctly, as the only owner of the LLC I would still file my income and expenses via the Schedule C as I have been doing in the past, is that correct?

Then I am still confused regarding the income as I have several different income streams for the business, so to provide more specific details:

- I have clients that will pay the business directly - this I understand would be documented as income for the LLC via cash/check payments

- I have a university that will pay me as a W-2 employee even though my services are from the business, and they will not pay my business so how do I document that as LLC business income so that I can deduct my expenses against it?

- I have a gym that pays me via a 1099 NEC for services that my business provides but they pay me as an individual, same question as above....how do I document this as LLC business income and deduct my expenses associated with it?

[user17681516237]

I do not understand....as the owner of the LLC, then how do I get paid for my services?  

[RobertB4444]

As the owner of an LLC you get to keep all of the net profit.  That is what you are being paid.  If the business is not making any money then you aren't either.

[user17681516237]

But is the income to myself from the LLC submitted differently on the Schedule 

C?  I feel like these short answers with no description are not helpful, nor addressing my more detailed questions.  Thank you for providing a more detailed response.

[RobertB4444]

If you create an LLC and you are the sole member nothing will change.

If you decide to become a single member S-Corp then you have a whole big change.  Now your LLC will file a separate tax return.  When you file as an S-Corp you also have to pay yourself what the IRS calls a "reasonable salary".  So - regardless of how well the business is doing - you will have a payroll with at least one employee on it - yourself.  This requires that you also file all of the necessary payroll tax returns quarterly.  You would need to fill out a W9 form and submit that to everyone who pays you so that the 1099 that you receive at the end of the year is made out to the corporation and not to you as an individual.  

[M-MTax]

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@user17681516237 wrote:

....is the income to myself from the LLC submitted differently on the Schedule C? 

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No, it is the same as if the LLC did not exist. A single-member LLC is disregarded for federal income tax purposes.

If you are confused about the exact structure or choice of entity (e.g., LLC v S corporation) you should seek guidance from a local attorney.

[user17681516237]

OK so one of the ways that I will earn income for the LLC is by W-2 directly to me, so how do I ensure that that income is attributed to my LLC in my tax filing and I can place expenses against it?

[DawnC]

As a single member LLC owner, you can't issue yourself a W-2 - you pay Self-Employment tax on your income.   If you elect S-corp status as a pass-through entity, you would pay yourself a salary, but not as a self-employed LLC owner filing Schedule C.      You can only be employed by a separate entity and if you file a schedule C, you and the business are the same entity.  

You report all of your business income and all of your expenses on Schedule C.   You pay tax on the net income.   Any draws of cash you take are not business expenses so they don't get reported.

W-2 income you receive is not business income.

[user17681516237]

This did not really answer my question.  I am a health and wellness professional considering setting up an LLC.  One of the services that I provide is to a university, but they pay me - as myself - and I receive a W-2 for that income.  They will not pay me directly to the LLC.  How do I apply that as income to the LLC versus just to myself?

[M-MTax]

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@user17681516237 wrote:

I receive a W-2 for that income.  They will not pay me directly to the LLC.  How do I apply that as income to the LLC versus just to myself?

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You can't because you're an employee of the university. 

[DawnC]

The wages the university pays you are personal income and can't be reported on your business's Schedule C.    If they gave you a 1099-NEC, that would go on your Schedule C.