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    4 Replies Latest reply on Oct 29, 2010 5:47 PM by wolfinu

    Help with LLC / freelancing

    wolfinu Newbie
      Hello everyone
      I will soon be starting my own personal clothing line. I have my creative close to done, but I still need to obtain a tax id. I will also be marketing myself and working as a freelance graphic designer. I have done some freelance before in the past but never full time. As many of us know, working self employed you will have to put away some money for taxes. A fellow freelancer friend suggest obtaining an LLC and the taxes won't be so harsh.

      So to my question
      Im looking for advice on the best way to go about this. Can I combine the companies and just have an LLC for both? Does anyone have any recommends on the best way to go about owning a clothing company and a freelance graphic design company? How not to get killed on taxes?

        • Re: Help with LLC / freelancing
          HS_Accounting Wayfarer
          Hi Wolfinu,

          You can combine your business activities under one LLC or have two seperate LLC's. However, it may be easier from an accounting/record keeping perspective to have one LLC . Also, keep in mind that you will have to pay self employment tax (15.4%) and you will have to pay estimated taxes on a quarterly basis. At the end of the year though when you do your taxes you can deduct half of the 15% in self employment tax. Below is a link to an IRS page that outlines in detail the tax implications of being structured as an LLC. Lastly, I recommend getting an accountant to help you with the estimated tax payments and year-end returns.

          Good luck!


            • Re: Help with LLC / freelancing
              wolfinu Newbie
              thanks for the answer and the link! Your information was very helpful. I will be getting a cpa, but I defanitely want to know what im getting into and want to know the best way to describe my situation to them. In hopes I will be able to support myself with the revenue from my clothing line and graphic design freelance work. thanks!
            • Re: Help with LLC / freelancing
              ACPG_Inc. Wayfarer
              From a federal standpoint, an LLC is a legal structure and not a tax structure. Converting a sole-proprietorship to an LLC won't necessarily change your taxes at the federal level. You can choose to be taxed as an S-Corp or C-Corp, which may be what you are referring to in the ability to decrease taxes. But doing so requires you to treat yourself as an employee and that comes with increased forms and complications.

              Also depending on the state you are in, switching to an LLC can come with significant cost. There are minimum franchise taxes in most states that you would be obligated to pay if you were to register as an LLC in those states.

              What is your reason for wanting to switch to an LLC? Or am I totally misunderstanding your question?

              American Consumer Protection Group Inc.
                • Re: Help with LLC / freelancing
                  wolfinu Newbie
                  acpg_Inc. - thanks for your response! Im a little green to dba's and LLC's so bear with me. I think what I was trying to get at was when I've done freelance graphic design work before I had to pay ALOT on taxes at the end of the year for being self employed ( that was not having a dba or llc)

                  A fellow freelance graphic design friend suggested getting an llc and paying taxes on what I earned from that year weren't half as bad. He didn't say anything about an S-corp or C-corp. Would that help my situation? I looked into obtaining an llc and it was around $200 which was great because my friend said his was close to $1000 where he lives.

                  So to sum up my reason for obtaining an llc would be this...
                  freelance graphic design without dba or llc - pay lots of taxes at the end of the year for being self employed
                  freelance graphic design with dba or llc - not pay an arm and leg on taxes from what I earned that year and own my one man freelance graphic design operation.