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To Incorporate or not?

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  • To Incorporate or not?

    I'm picking up some moonlighting income this year in order to work on some student loans, and I'm also planning to meet with a CPA re: taxes, etc.  One of the guys I talked to on the phone (we haven't met in person yet), mentioned incorporating, I believe he recommended an S Corp, to take advantage of my incoming 1099 income.  My FT job pays me W2, and I'm making a healthy salary there, and I expect low 6 figures for the moonlighting gig (assuming I don't work too much and burn out and just quit and move to the beach...).


    Do I need to incorporate?  I'm not too likely to continue with a significant amount of moonlighting after loans are done (2-3 years), and my understanding is I should still be able to set up a solo 401k with just an EIN, which I can get with any 1099 income without the need of complicating my situation with incorporation.  I read which seemed to point me in the direction of not incorporating.

  • #2
    WCICON24 EarlyBird
    No, you should not incorporate. The administrate costs (filing corporate income tax returns, payroll tax preparation, and filing payroll tax returns) outweigh the negligible Medicare tax savings. At low 6 figures, in fact, I would project no tax savings. My estimated break-even point to incorporate (for physicians doing this as a side gig) is around $300k. If you are concerned about liability for some reason, you can form a simple PLLC (except in CA). But remember that the LLC will not provide protection for any professional negligence on your part, so it is useless for the most part.
    My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
    Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients