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Ask HN: How do you manage your single-member LLC for consulting?
Occasionally, I do consulting/contract work for various clients. A few years ago, I was advised to set up a single-member LLC with S-corp election so that I could save on self-employment taxes. This saves me thousands of dollars a year in exchange for some amount of paperwork.
The paperwork burden isn't huge, but it's large enough to make me wonder if others have found a better solution. In contrast to a sole-proprietorship, I have to manage the following:
- Payroll software to process paychecks (to myself)
- Unemployment insurance filings
- Annual Franchise tax report
- K1 and 1120s
- Business bank account
What combination of services are others using to manage all of this? I currently use Gusto + TurboTax + manual effort, but it feels like overkill for such a common, simple LLC arrangement.
- briandoll 9y agohttps://blog.reifyworks.com/the-business-stack-2016-edition-84d83319a90b https://blog.reifyworks.com/the-business-stack-2016-edition-...
- philiphodgen 9y agoOut of curiosity . . . why an LLC with an S corporation election? Why not a corporation with an s corporation election? (Note: I am a tax lawyer and am genuinely curious. I can think of a few reasons, which are mostly driven by unique local conditions. I routinely tell California business owners to choose corporations rather than LLCs in this situation. I am curious about your particular situations and why the choice made sense for you.) Also. Sorry to tell you but the overhead you are experiencing is normal. And it gets worse from here. Government bureaucracies (in California at least) hate employers and fill their pockets with rocks and then tell them to go swimming. Just wait until you are in the swampy zone of 4-5 employees. Too small to pay someone to make the pain go away, too big to avoid serious brain damage. But I’m not bitter and I do not judge. (Rolls eyes and walks away muttering to himself).
- ameesh 9y agoI should start by saying I created an LLC solely for my on-the-side consulting, both for the tax benefits and whatever "corporate veil" protections it would provide. I'm not planning on ever adding investors or partners. I really doubt I'd ever have employees either. From what I've read, the paperwork burden is significantly higher with a corporation vs an LLC for (AFAIK) no added benefits in my situation. Based on the many blogs advocating single-member consultancies to work under an S-Corp, I'd imagine there are many folks out there in an identical position. I was hoping someone had created a cookie-cutter solution for a reasonable price. Shoot me an email if you'd like to discuss this in depth. I'm interested in easing this burden for others, if possible.
- philiphodgen 9y agoS corporation status is good. It can save money on social security tax costs compared to a regular corporation or self-employment. Paperwork burden may be slightly lower for an LLC. The LLC eliminates annual minutes for the Board of Directors and shareholders. Hint: this is, 99.9% of the time, a template Word document. In about 20 years of me being the sole shareholder of my own S corporation I have done something else (i.e., minutes other than these template annual documents) exactly zero times. I find that people (whether owners or banks or other beings you interact with) sometimes have a bit of cognitive difficulty with the slight cross-species aspect of being an LLC but walking like a corporation. So there you have my opinion. Nothing wrong either way. I favor a small extra amount of automated paperwork every year over dealing with cognitive dissonance in strangers’ brains. It’s not decisive but it is my preference. To go full Reddit, I want a duck, not a horse dressed like a duck. :-) Both systems work. It’s what you do afterwards with your company that matters. E.g., what you are wrestling with right now. I know of no cookie cutter solutions. Sorry. I manage this for a couple of people (bookkeeping, payroll, tax returns, etc.) in my firm and it is a thankless painful job.
- mapster 9y agoi use none of the above. sole prop., taxes are easy since I have no empl. or complex expenses. i do maintain business insurance (~$20/mo). my bank keeps hounding me to set up a biz account. I'm too lazy. Its easy to find my deposits and expenses by downloading bank account data as excel.
- gt2 9y agowith a sole prop are you not concerned with tax advantages of setting up an SCorp or LLC with SCorp election? If you are running a business, the tax benefits have good reason for your risk and rewards being the business owner.
- kidlogic 9y agoI currently have developed a product that handles the paperwork burden for c-corps, s-corps, llc, non-profts, etc.. imagine a registered agent that has a much better web interface. happy to chat in more detail
- ameesh 9y agoInteresting - my email is in my profile, send me a note
- gt2 9y agoPayroll service recommendations anyone? Seems the big ones (ADP, Wells Fargo) are around 60 per month and it seems ridiculous for a 1 man show that may only need a single paycheck cut per year. Is there a better way to handle this?