Author Topic: Should I make my side gig into an LLC?  (Read 2292 times)

jwc082

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Should I make my side gig into an LLC?
« on: September 05, 2015, 10:30:07 AM »
Looking for some advice from Mustachians with small biz, legal, or tax experience.  I'm pretty clueless about business taxes, and trying to do my due diligence before I take action:

Should I make my side gig into an LLC?  And if I do, what will it mean for my taxes?

I have a side gig that's pretty profitable - I earn between $10k and $20k per year spreading lime (think fertilizer) on farmers' fields using my own spreader truck.  I'm not incorporated now, just been doing it as a side hustle.  Since it's seasonal work - mostly in the summer - it fits in nicely with my job as a teacher.

However, I want to be covered so that if I, say, run over somebody with my truck, they can't sue the pants off me.  Also, I know there are tax benefits, but not sure if they're enough to justify an LLC.

Is an LLC the best route to go?  And if so, what'll I need to do when I file taxes?

I've done some reading on websites like legalzoom and incorporate.com, but I'd rather get the educated advice of a fellow Mustachian :)

Thanks!

Greg

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Re: Should I make my side gig into an LLC?
« Reply #1 on: September 05, 2015, 10:41:38 AM »
Your liability will be slightly lessened by forming an LLC, but not as good as if you incorporate.  Your liability will depend more on your insurance.  I doubt your personal auto/driver insurance would cover you in case of an accident, since it's off-road and for business use.  I'd look into insurance first, it may require you to be an LLC at a minimum.

In some cases a single-member LLC is treated like a sole proprietorship, especially by the IRS.

protostache

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Re: Should I make my side gig into an LLC?
« Reply #2 on: September 05, 2015, 10:45:13 AM »
I have a side gig that's pretty profitable - I earn between $10k and $20k per year spreading lime (think fertilizer) on farmers' fields using my own spreader truck.  I'm not incorporated now, just been doing it as a side hustle.  Since it's seasonal work - mostly in the summer - it fits in nicely with my job as a teacher.

However, I want to be covered so that if I, say, run over somebody with my truck, they can't sue the pants off me.  Also, I know there are tax benefits, but not sure if they're enough to justify an LLC.

Is an LLC the best route to go?  And if so, what'll I need to do when I file taxes?

You're always liable for your own torts, even they happen when you're operating as an agent of your business. If you want to protect yourself and your business from liability like that, buy insurance. Talk to an insurance agent.

The LLC protects you from the financial liabilities of your business. For example, if you buy a new spreader truck as the LLC with a loan and somehow you get away without signing a personal guarantee, and then you can't pay the loan. The bank can take the truck, and if that's not enough they can come after your business accounts, but they wouldn't be able to come after your personal accounts.

It would maybe get you some additional tax flexibility (if you elect something other than the default disregarded status), but the extent of which depends on how much other income you have in relation to this side gig. The default rules for a single member LLC are the same as a sole prop, which is to say the income and expenses flow through to your personal form 1040 on Schedule C.

Assuming you make what other teachers I know make (~$40k with benefits), and this side business makes another $20k, it's unlikely the LLC will pay off in saved taxes because you'll be out the yearly filing fee and possibly an accountant fee to at least discuss your taxes the first year.

jwc082

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Re: Should I make my side gig into an LLC?
« Reply #3 on: September 05, 2015, 10:49:58 AM »
Your liability will be slightly lessened by forming an LLC, but not as good as if you incorporate.  Your liability will depend more on your insurance.  I doubt your personal auto/driver insurance would cover you in case of an accident, since it's off-road and for business use.  I'd look into insurance first, it may require you to be an LLC at a minimum.

In some cases a single-member LLC is treated like a sole proprietorship, especially by the IRS.

Roger that - so insurance is what I need more of, not necessarily an LLC.  Thanks!

jwc082

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Re: Should I make my side gig into an LLC?
« Reply #4 on: September 05, 2015, 10:56:06 AM »
I have a side gig that's pretty profitable - I earn between $10k and $20k per year spreading lime (think fertilizer) on farmers' fields using my own spreader truck.  I'm not incorporated now, just been doing it as a side hustle.  Since it's seasonal work - mostly in the summer - it fits in nicely with my job as a teacher.

However, I want to be covered so that if I, say, run over somebody with my truck, they can't sue the pants off me.  Also, I know there are tax benefits, but not sure if they're enough to justify an LLC.

Is an LLC the best route to go?  And if so, what'll I need to do when I file taxes?

You're always liable for your own torts, even they happen when you're operating as an agent of your business. If you want to protect yourself and your business from liability like that, buy insurance. Talk to an insurance agent.

The LLC protects you from the financial liabilities of your business. For example, if you buy a new spreader truck as the LLC with a loan and somehow you get away without signing a personal guarantee, and then you can't pay the loan. The bank can take the truck, and if that's not enough they can come after your business accounts, but they wouldn't be able to come after your personal accounts.

It would maybe get you some additional tax flexibility (if you elect something other than the default disregarded status), but the extent of which depends on how much other income you have in relation to this side gig. The default rules for a single member LLC are the same as a sole prop, which is to say the income and expenses flow through to your personal form 1040 on Schedule C.

Assuming you make what other teachers I know make (~$40k with benefits), and this side business makes another $20k, it's unlikely the LLC will pay off in saved taxes because you'll be out the yearly filing fee and possibly an accountant fee to at least discuss your taxes the first year.

Okay, this is exactly the advice that I needed.  More insurance seems like the best route to take.  Since I don't plan on taking out any loans for the business, the financial liabilities protection perk of an LLC doesn't help me any. 

And you're right on with the teacher income ;)  I've been reporting income on schedule C already, and so there aren't really any other benefits.  If the amount I'll save in taxes is less than what I'll spend for preparation and all that, then it's not worth it...

More insurance is the answer, then!

Thanks!

jwc082

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Re: Should I make my side gig into an LLC?
« Reply #5 on: September 05, 2015, 10:57:11 AM »
Also, I'm continually amazed at this forum in not only how fast questions are answered, but also with the quality of the answers.  I'm astounded at the help and the community support here.

Thanks again - big time!

Rollin

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Re: Should I make my side gig into an LLC?
« Reply #6 on: September 08, 2015, 09:18:08 AM »
My experience - I needed a Workers Comp exclusion for a couple of jobs ("we don't let anyone work on our properties without WC or an exemption"), but before I could get that I needed to be an LLC.  Now I have the privilege of submitting an annual report for over $100/year (after paying to set up the LLC).