AboutMike Wellman Expertise I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size. I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All others will be referred to the question pool.
Experience Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.
Publications New York Times, Wall Street Journal, You Money Magazine
Education/Credentials BBA, Baylor University.
Awards and Honors My website http://www.IRSOS.com won the Knowledgeweb award for educational excellence for content.
Expert: Mike Wellman Date: 11/15/2007 Subject: Best tax Structure for startup
Question HI!
I am currently starting an online business. I do not plan on being a "big" business, but I am still concerned that in the unlikely event that I turn a great profit and do grow that I have selected the best business structure. So my question is, for tax purposes is it better to have a sole prop or an LLC given that I would be a small one person company? Are they not taxed at the same rate? Something like 27%! I do not want to incorporate as I don't think that will be necessary. In terms of liability I will be selling general merchandise online so I don't know if there is much risk in that(maybe I'm wrong). As you can see I am a total newbie and just want some idea of how to best structure my small business so that I am not killed come tax time. Thank you very much for your time.
Answer A single member LLC is disregarded for federal income purposes. It is treated as a sole prop. so there is no difference between the two. The two questions then are of liability and ease of formation. A sole prop. requires no effort to form so it is the best in that regard. As for liability, I doubt you have much to worry about unless you sell products that create risk - like toys made in China. Can't assess that for you without more information and risk assessment in that area is not my expertise.
I would go as a sole prop. unless you determine risk exists.
