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Written by : Delmer Priest |
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hey everyone its Sam I'm Brian from Brian Taylor law and today we're discussing if an independent contractor should get an LLC before we get into it Brian Taylor law is a business law firm we hope business owners start businesses and we also help business partners result of partnership disputes so should any pending contractors get LLC's I believe so I think generally they're going to be a good idea it's a very low cost thing to set up an LLC and the ongoing requirements are very flexible and they provide two main benefits asset protection in case you are liable for a judgment and tax efficiency for business lawyers so we're not going to really get into the tax part of it so we're gonna mainly focus on the asset protection part so if you're independent contractor and you're doing work in your own individual name you are interacting with people and every interaction that you have with a customer or vendor client whatever when you're doing business is potential exposure for a lawsuit and every contract you sign every project you take on is going to increase that exposure so if you are doing work in your own individual name the worst thing that can happen to you is something were to happen and they may not even be your fault but you have a contract we have an agreement and something goes wrong and customer client vendor decides they want to sue you they're going to sue you in their own individual name so that means that if you lose the lawsuit you are going to be responsible to pay that judgment and if you don't have the cash to pay the judgment then your other assets could potentially be seized to pay that judgment so if you have an LLC and you're in the same scenario so you have an LLC you do some work and something goes wrong you Sood and you lose the LLC has to pay the judgment so the extent of reliability is whatever the LLC owns your other assets outside of the LLC so assets that are not owned by the LLC won't be touched to satisfy judgments against the LLC so I hope you can see from there that when you're doing work as an independent contractor it really does benefit you to put your your business into an LLC and then again you have the attached benefits as well having said all of that there was a scenario that I did come across before where it was not in the independent contractors best interest to form an LLC it doesn't really happen often and it happened because so essentially is we decided not to advise them to form an LLC because this particular person was in some sort of government program that had income requirements so I think one of the requirements was that they were not allowed to own a certain percentage and any type of company so when you have an LLC and here's a company and if you end up in a contractor and you're forming out and they'll say then obviously you're gonna own a hundred percent of a company and so having that would have violated the terms of that government benefit and so in that case and it wasn't have been advisable for that person to own an LLC but and just pretty much any other case it's really not gonna hurt you if you're an independent contractor to form an LLC it's only gonna help if you as long as you're good at record-keeping and you're keeping a bank account separate when you're forming an LLC and you're you're maintaining the annual requirement then you're going to see that that you're protecting yourself a lot more as an LLC owner than just doing business in your own individual name so I hope that was helpful if it was please feel free to like comment subscribe there's anything in the comments or if there's anything in the videos that you feel that you would like for us to talk about more please feel free to let us know we're here for you we like to provide content that we feel provide to value so hope you enjoy and we'll talk soon
Thanks for your comment Nelia Antignani, have a nice day.
- Delmer Priest, Staff Member
hey everybody john dylan here from equinox home financing today i wanted to talk to you about calculating or understanding how income works if you're self-employed when trying to buy or finance a home there's all different kinds of you know situations out there for people to be self-employed so we'll start from like the different tiers as far as simplicity to complexity goes you know if you're a 1099 contractor for example and you're just a contractor independent you're self-employed because you control your hours your time could be commission based it could be service based whatever the the reason is 1099 contractors are self-employed you get a 1099 at the end of the year and then you file that on your 1040 tax returns on the form called schedule c it's your business profit and loss that would be like the easiest and most simple way to go to file taxes next step up would be having a sole proprietorship so that means that you're self-employed you may have a restaurant or a retail store or a service that you do you don't have a corporation and you're not 1089 you know you go to the county recorder's office you file what's called a fictitious business name and you get a dba dba stands for doing business as don't have a federal tax id number instead everything's tied to you personally under your social security number and in this instance whatever you generate an income you would also file on your schedule c tax return okay um same as a 1099 contractor same form on the 1040. the next and last phase is typically a llc or a corporation this gets a little bit more complex so i want to take my time to explain this number one if you have a corporation there's a couple of different ways to pay owners of the company number one if a corporation w2'd the owner as an employee you would get payroll checks consistently and w2s at the end of the year that's one form of income okay the second is every time you pay yourself non-w-2 that's called an owner's draw that means you're paying yourself money and at the end of the year the corporation would issue you a k-1 form if you got w-2 from your corporation and you took draws you now have two forms of income which would both then translate to the 1040 when you go file at the end of the year both of these forms you know well the k1 would get filed on your schedule e tax return before write-offs or whatnot these are the forms that we would be using so if you're a 1099 contractor or a sole proprietor and when you're looking to finance a mortgage or buy a home we're just looking for two years of tax returns okay 1040 tax returns that's all you need you know we don't need the 1099s we don't need to verify anything else because these are filed with the irs and you know that's what we go off of if you have a corporation we will need all your corporate tax returns for two years and two years of your 1040s for us to be able to analyze what your exact self-employed income is if you have any other questions about how to calculate that or if you need help calculating what your income should or will be give us a call today we'll be glad to help you out thank you subscribe to our channel below so you can find out more about home financing
Thanks Karima your participation is very much appreciated
- Delmer Priest
About the author
I've studied public safety at University of Wisconsin-Eau Claire in Eau Claire and I am an expert in complexity economics. I usually feel content. My previous job was petroleum engineer I held this position for 25 years, I love talking about darts and crocheting. Huge fan of Ted Turner I practice snow skiing and collect sports cards.
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