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I have a California LLC too. It's not any harder than the steps explained in the article. Certainly don't form an LLC unless you need one. You'll know you need

I have a California LLC too. It's not any harder than the steps explained in the article. Certainly don't form an LLC unless you need one. You'll know you need one when you need one. > Now guess what? You have to start filing 1120S corporate taxes plus the California equivalent. All the LLC/S Corp income flows right through onto your personal tax return, but you also get to get to file 940 and 941 payroll tax forms and the state equivalents. This not true of all LLC's, just corporations. If you're forming a small LLC, especially a single member LLC, you can create a pass through entity that avoids all of the ceremony you're explaining. Mentioning all this makes it sound like it's obligatory to establish a corporation when you form an LLC, but that was only necessary in your specific case (probably for the company you were trying do business with to avoid AB5).

Stratoscope 6y ago
That's a really good point, thanks for mentioning it. Looking back on this, if it had been just an LLC it would have been no big deal at all. It would be a "disregarded entity" with ordinary 1099/Schedule C income, no different from any of my previous clients, with an easy tax return like the ones I'd done many times before. It was the S Corp election which this client required that really messed everything up. In hindsight, this truly was the proverbial "client from hell". It was an interesting project, albeit quite an experimental one. I got paid for only a week of work after spending a full month on it, and then I got the ongoing heartache of the S Corp nonsense to boot. Thanks for pointing out the distinction between the LLC and the S Corp.
- jameslk 6y ago
  It definitely sounds like a terrible client, especially making you jump through these hoops just to work with them. Sometimes it's hard to know until you've started working with them how the relationship will turn out. A client forcing you to form an S-corp and put yourself on payroll doesn't exactly establish trust and is probably a bad sign of things to come. Despite this, I wouldn't let it sour your view of self-employed work. I was an independent contractor for 6 years and then started a more formal business after. The freedom of picking where, when and how you work, who you work with, how much you'll charge, and most rewarding of all, building and owning your own thing, can be very fulfilling. Maybe you had other reasons to desire employment again, this is certainly not for everyone, but if it's all interesting to you, it's worth it just for the personal growth.
- SoylentYellow 6y ago
  Why did your client care about how the government taxed your LLC?
  - bavell 6y ago
    This is the big red flag - I would have pushed back immediately and bailed if they didn't acquiesce. Client has no authority to say how your business should be taxed, that's preposterous. They're doing you a favor by letting you know in advance how difficult they'll be to work with.

Stratoscope 6y ago

That's a really good point, thanks for mentioning it. Looking back on this, if it had been just an LLC it would have been no big deal at all. It would be a "disregarded entity" with ordinary 1099/Schedule C income, no different from any of my previous clients, with an easy tax return like the ones I'd done many times before. It was the S Corp election which this client required that really messed everything up. In hindsight, this truly was the proverbial "client from hell". It was an interesting project, albeit quite an experimental one. I got paid for only a week of work after spending a full month on it, and then I got the ongoing heartache of the S Corp nonsense to boot. Thanks for pointing out the distinction between the LLC and the S Corp.

jameslk 6y ago
It definitely sounds like a terrible client, especially making you jump through these hoops just to work with them. Sometimes it's hard to know until you've started working with them how the relationship will turn out. A client forcing you to form an S-corp and put yourself on payroll doesn't exactly establish trust and is probably a bad sign of things to come. Despite this, I wouldn't let it sour your view of self-employed work. I was an independent contractor for 6 years and then started a more formal business after. The freedom of picking where, when and how you work, who you work with, how much you'll charge, and most rewarding of all, building and owning your own thing, can be very fulfilling. Maybe you had other reasons to desire employment again, this is certainly not for everyone, but if it's all interesting to you, it's worth it just for the personal growth.
SoylentYellow 6y ago
Why did your client care about how the government taxed your LLC?
- bavell 6y ago
  This is the big red flag - I would have pushed back immediately and bailed if they didn't acquiesce. Client has no authority to say how your business should be taxed, that's preposterous. They're doing you a favor by letting you know in advance how difficult they'll be to work with.