A Public Policy Polling poll, released last month from Businesses for Responsible Tax Reform, found that 51 percent of small businesses are against the current administration's sweeping tax bill. Most of the respondents cited the opinion that large corporations were prioritized over small businesses. For freelance individuals, starting an LLC might be the best move.
I've written before on why establishing your business as an LLC is essential entrepreneur knowledge — and it's often as easy as looking up your state’s free online registration portal. But assuming the tax plan makes its way into law, any self-employed individual will find an LLC to be even more handy than ever. Here's why.
Get an LLC
Tom Wheelwright, a CPA and CEO of the Tempe, Arizona-based CPA firm ProVision, gave a statement to TechCo offering his reaction to the tax bill and its impact on freelancers.
“Freelancers should definitely set up their business as an LLC,” Wheelwright states. “Under the new tax law, they will have a choice of whether to be taxed as a flow-through entity and receive a tax benefit of a 20 percent deduction (Senate bill) or a 25 percent maximum tax rate (Housebill) or taxed as a corporation (flat 20-22 percent rate expected). An LLC can choose which way it wants to be taxed, and there will be some time to make that choice if the LLC is already set up.”
The tax bill “targets” self-employed people without an EIN, political activist and cofounder of civic tech start-up DailyClout Naomi Wolf stated on Twitter, adding that the bill cuts “almost all” their deductions, from child and dependent care, education expenses, job expenses, and home office deductions. Another self-employed commenter recalculated a few past years and found that they would pay $5,000 more for each of them.
The advice in one of the comments: Set up an LLC.
Yes, sole-props are fucked. Set your business up as LLC, file 1065, issue yourself a K1
— AC Collins (@accollinsbooks) November 26, 2017
You can learn more about what's changing over here or here, but the experts seem to agree: An LLC is the best path forward for small-time freelancers and tiny businesses.
Read more tips and tricks for small businesses on TechCo