But neither of those are quite right:
1) the same tax deductions are available on your normal schedule C
2) while acting on behalf of your LLC you’re still personally liable for your actions (let alone your illegal schemes).
If you’re going to try to avoid it by paying no salary and all distributions for work that you personally did, you’ll likely fall afoul of the “reasonable salary” test, designed to prevent exactly this.
I'm not a tax accountant or a lawyer, just happen to run my own consulting through an S-Corp. I still pay myself around half of the net revenue the S-Corp brings in as a regular employee, and that portion is taxed under FICA.
1) The benefit only applies to profits above "a reasonable salary". You need to determine and potentially later defend what you chose as a "reasonable salary".
2) Once you have over ~150K income (including your day job's salary and LLC profit), social security taxes phase out so most of the benefit is gone (just the medicare portion remains), unless you have a HUGE LLC profit.
3) There's overhead in filing taxes on an s-corp.
All this probably makes sense if you have >$100K LLC profits and no other big income source, or maybe if you have >$500K LLC profits regardless. You'll def want an accountant. Companies like Collective.com exist to make it easier to go the s-corp route if you choose to go that way. But it is complicated for some minor savings.
Your business also gets tax breaks you don't, namely on (paying for your) health care, (paying for your) retirement savings, depreciating assets, (paying for your) salaries, food, travel, lodging, equipment, and services. Further, the cap on business 401k accounts is way, way higher [1]. The ability to sock away even more pre-tax money in a retirement account, and deduct your health insurance from your taxes is insane.
The biggest downsides, at least for me, have been the infra to get it all going. I have an accountant, a lawyer, a financial planner, and an army of online services that help me stay legal and paid up. That said, I'm still coming out ahead (e.g. they don't cost $24k/yr and you guessed it, startup costs are tax deductible), so the gains are there.
(I think paying taxes is patriotic, but I don't think it's reasonable to pay taxes on $200k of income for one year, and then only make $60k of income the next year. I also don't think it's reasonable for me to pay ~40% of my income in taxes while big corporations and the rich pay very little so....)
[1]: https://www.fidelity.com/learning-center/personal-finance/re...
Most of the other things you list are available to sole proprietors too: "(paying for your) retirement savings, depreciating assets, (paying for your) salaries, food, travel, lodging, equipment, and services"
I'm not sure about health care, are you sure there's no way to deduct it as a sole proprietor?
Obviously, an LLC cannot shield you from criminal liability.
(disclaimer: I work for Stripe which had a product that works like that, but not anywhere near that team)
> generally courts have a strong presumption against piercing the corporate veil, and will only do so if there has been serious misconduct. Courts understand the benefits of limited liability... As such, courts typically require corporations to engage in fairly egregious actions in order to justify piercing the corporate veil
LLCs still protect personal assets in the general case.
I have a highly paid accountant who says otherwise. Care to elaborate?
