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Stay Sole Proprietor as IC?

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  • Stay Sole Proprietor as IC?

    I am in my first half year in a travel position paid as an IC.  Right now I am a sole proprietor.  Total gross for the job assuming a full year's work next year would be ~375k.  In speaking to my accountant, he suggests remaining as an sole proprietor rather than forming an LLC and taxing it as an S-corp as he says the net benefit on taxes wouldn't be that substantial, and that the more states I work in potentially decreases that net benefit.  I am surprised because it seems like the overwhelming opinion on the blogosphere etc is to form an LLC and tax it as a S-corp.  What do you think?

  • #2
    It's a close call at $375k. It sounds as if your accountant is trying to do the right thing. My typical line of demarcation for electing S-corp status is $300k - $350k in gross receipts and you are not much above that. Whether to go S-corp depends upon:

    • States you'll be filing in and cost of filing in each state;

    • Your accountant's fees for filing a corporate tax return and payroll compliance; and

    • Your business deductions.

    If you can get the estimate of point 2 from your CPA, I can share a spreadsheet with you that I use to calculate the cost/benefit. You'll have to give me your email address, though.

    If you will have to file in CA, where the minimum fee is $800/year (except the first year), that will significantly reduce the benefit.

    Of course, you have until next year to make this decision and can wait awhile to do so.

    So, you'll be making $375k in 2018 as a resident? Or have you just not updated your profile?
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087