I am an independent contractor for entertainment and events work. I am currently a sole proprietor, but would it be more beneficial if I had a company to run money through?
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Hello Nicofax22,
Thank you for participating in our Ask the Expert event today. As to your question, realize as a sole proprietor that you are a company already with your name as the business name unless you are formally operating under a different one. Having said that, the reaons someone would form a different entity as the company are varied but primarily center around legal protection, complexity, and possible tax advantages.
First, forming a separate entity, whether that is an LLC or corporation, protects your personal assets from any business liability, meaning if something happened in the course of your business then someone could sue you and possibly have claim to your personal assets if any judgment comes back not in your favor. To ensure you keep that separation tight you should not mingle your personal and business assets.
Second, from what you shared below in being an independent contractor in the entertainment and events business, I'm guessing you don't have any employees right now. But, should you grow and expand to have employees you definitely would want a separate legal entity than just you as a sole proprietor.
Finally, being a sole proprietor, you are subject to self-employment tax on your net earnings. Depending on the type of entity you create, some of that tax is absorbed by the company itself as an expense and may not necessarily flow to you as the owner.
Here is an article you may find useful.
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