On Dec 8, 2016, at 6:48 PM, Vara La Fey <[email protected]> wrote:
I was clarifying generalized things for the poster who mentioned LLC
as a suggestion from his accountant.
Was that poster you?? Then you're welcome. Was it someone else??
Then correct my errors or kindly stick to your original grievance.
- Vara
- www.facebook.com/vara.lafey [1]
On Dec 8, 2016 4:39 PM, "David Schwartz"
<[email protected]> wrote:
I’m not sure what the point of these “Rah Rah for LLC!” posts
is all about. Nobody has said anything to the contrary.
This list is primarily for people who work in the "high tech" (i.e.,
computing) industry, which is SPECIFICALLY what Sec. 1706 of the Tax
Code deals with.
If you’re in Real Estate, Accounting, Architecture, or whatever,
1706 does not apply to you. It’s very, VERY NARROW in its
applicability — BY DESIGN.
Sec. 1706 eliminates the “safe harbor” provisions for people who
work as contractors, eliminating any “benefit of the doubt” that
is historically given in most other professions, and instead
subjects workers and the companies that employ them to a vague
22-point (IIRC) series of questions that an IRS Auditor can use to
establish whether someone should be (or should have been) regarded
as a “contractor” or “employee” for tax purposes.
The problem is, this is not something that is adjudicated when you
hire on, and it does not matter how many reams of paperwork you sign
that says it’s one thing or the other.
It’s a ticking time-bomb that applies in the vast majority of
cases 3-5 years AFTER THE FACT when the person — usually hired as
a contract worker at the time — is audited by the IRS for whatever
reason, and the auditor reviews one of his employment situations and
subjects it to the 22-point “test”. If he rules the person was
acting as a “contractor”, all is fine.
But if he rules the person should have been treated as an
“employee”, both the person and the erstwhile “employer”
just got nuked.
The back-due taxes assessed to the “employer", plus accrued
penalties and interest, typically amount to far more than whatever
the person was paid. The company has no knowledge anything went awry
until they suddenly get a bill from the IRS.
Meanwhile, the person in question now has to “unwind” any
business expenses and deductions, as well as anything that depended
on them such as retirement contributions, FICA/FUTA/UI set-asides,
etc. Everything is up-ended and needs to be re-filed.
And to add insult to injury, the same auditor is likely to flag
previous and subsequent years for auditing as well, and what do you
think he’s going to rule on other contract gigs that were
fundamentally the same situations as the first one he nuked?
Again, if you’re not in the high-tech industry, this does not
apply to you.
Having a single-member LLC stand-in to protect you against such
situations can be helpful, IF the company you want to work with is
willing to hire you. Many are not because of problems discussed in
other threads.
-David "The Tool Wiz" Schwartz
On Dec 8, 2016, at 4:53 PM, Vara La Fey <[email protected]> wrote:
Yes, you can be the only user ("Manager" and "Member") of an LLC. I
did it for years in real estate, and still have my LLC.
IIRC the form takes more like 5 min. You publish your intended LLC
in the Record Reporter for 6 weeks. I forget the cost, but it's
fairly cheap and easy. And IIRC, the Sec of State office (or
wherever I went) has a form for that too.
LLCs are almost zero maintenance and are not sublect to hostile
takeover. And so easy that some real estate investors create one for
each property, just to keep properties legally isolated from each
other for basic liability reasons. An LLC name like "<street
address>, LLC" is one of those. (So named cause the investor
realized that pretty names would be silly and confusing.)
Good luck!! :-)
- Vara
- www.facebook.com/vara.lafey [2]
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