I’ve heard that contractors should do business as an LLC so they can’t be sued. Is that true?
A conversation I had earlier this month answers the question.
But first, let’s define some terms. Members of an LLC (limited liability company) get the advantage of limited liability (like a corporation) but have the option of paying tax as either a partnership or a corporation. The IRS considers a single-member LLC to be the same as the owner for tax purposes but a separate company for employment purposes. The cost of setting up an LLC to comply with law in your state will be at least several hundred dollars for filing and recording forms. Plus, most states charge LLCs a minimum franchise tax. In California that’s $800 a year plus a fee on gross revenue that adds another $900 for up to $500,000 in income.