Need Advice! Should I get a LLC or Join my dad's Business

[zerocool]

Ok I really dont know what to do here and I think my situation is a little unique. So maybe some one can help me.

So few months ago I took some time off from school and started a some freelancing web design and software development but now it is generating a couple thousand a month to make me start thinking about taxes. Currently I am getting checks from my clients on my personal name I am possibly thinking about getting an LLC so i can get some tax breaks and can claim some expenses on the taxes but I really dont want to LLC yet either because I think i might go back to school in a few months. So here is the other part.

My dad already has a business that he runs and is an LLC and he is willing to let me have my clients write checks on that business name. Is that a good idea. I am ok with all my checks going to my dad and his business. how does this affect his taxes and things like that? even though i will be the one handling all the clients and things. will my dad have to put me on as an employee on his business name or can i still run mostly everything and then just have him claim the expenses that i occur as expenses he incurred?

Any advice on this would be great. oh and if it helps i am in florida.

[Business Attorney]

The short answer is that with proper planning and implementation either way can work. Notice the emphasis on "with proper planning and implementation."

One thing I need to correct is that having an LLC (or corporation for that matter) does not change whether you "can claim some expenses on the taxes." If you are operating a business even as a sole proprietor, you are entitled to deduct your ordinary and necessary business expenses related to that business. An LLC is still only entitled to claim ordinary and necessary business expenses. The LLC does not magically changes a non-business expense into a business expense.

[Freelancier]

I wouldn't bother. The tax situation is exactly the same between a single-person LLC and a DBA or sole-proprietor setup, so there's no advantage for taxes. Where you have an advantage with an LLC is the liability protections, but since you're a student and likely have no assets or money and what you're doing is not going to cause deaths if you do it wrong, it's not a big deal to go nekkid (did it really just censor that??) for this.

When I was in school, I was doing freelance programming without the liability protections... and it complicated my parents' tax return, since they were claiming me as a dependent, so maybe you also want to talk with them about it to make sure that you both minimize your tax burdens. And maybe they take you to their accountant to get all this figured out.

[zerocool]

Thanks so much for the responses. I guess i will just stick with i have been doing. You are right i dont have any assets or any real investment and liabilities of things going wrong.

[PayForWords]

I would just do it as a side income and put aside money for taxes at the end of the year.

Personal income is personal income and unless you are pulling 100K+ a year, I wouldn't worry about it.

Keep up the good work and good luck in school!

[BIZDEV]

if you are making $2,000 a month you need to start treating your little side business as a real business now. You are self employed in the eyes of the IRS. You need to register a business name (very easy and inexpensive...see my signature for details) and get your own business checking account.

There is no need for an LLC. As was already explained, you can still get tax deductions as a sole proprietor. No need for special tax filing. And even down the road you might not need the LLC. Most people go that route just for the so-called protection of their personal assets. But there isn't any real protection. It is SO easy to "pierce the veil" of protection that it's non-existent for all practical purposes.

Lastly, your dad should not be accepting payment from your customers and tacking it onto his business. The IRS would not be happy if he ever gets audited. The IRS rules the world so you don't want to get on their bad side this early in your entrepreneurial career.

Sounds like you have a promising future! Keep up the good work.